How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Vertex Energy Inc (NASDAQ:VTNR).
Hedge fund interest in Vertex Energy Inc (NASDAQ:VTNR) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that VTNR isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). At the end of this article we will also compare VTNR to other stocks including ADDvantage Technologies Group, Inc. (NASDAQ:AEY), Entera Bio Ltd. (NASDAQ:ENTX), and Sunesis Pharmaceuticals, Inc. (NASDAQ:SNSS) to get a better sense of its popularity.
Video: Watch our video about the top 5 most popular hedge fund stocks.
In today’s marketplace there are a lot of gauges shareholders put to use to analyze publicly traded companies. A pair of the most under-the-radar gauges are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the elite fund managers can outclass the market by a healthy amount (see the details here).
Adam Usdan of Trellus Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind let’s analyze the key hedge fund action regarding Vertex Energy Inc (NASDAQ:VTNR).
What have hedge funds been doing with Vertex Energy Inc (NASDAQ:VTNR)?
At third quarter’s end, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. On the other hand, there were a total of 6 hedge funds with a bullish position in VTNR a year ago. With hedgies’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Douglas Dossey and Arthur Young’s Tensile Capital has the most valuable position in Vertex Energy Inc (NASDAQ:VTNR), worth close to $1.5 million, comprising 0.2% of its total 13F portfolio. Coming in second is Mark Broach of Manatuck Hill Partners, with a $0.6 million position; the fund has 0.3% of its 13F portfolio invested in the stock. Some other members of the smart money that hold long positions comprise Adam Usdan’s Trellus Management Company, Israel Englander’s Millennium Management and Philip Hempleman’s Ardsley Partners. In terms of the portfolio weights assigned to each position Trellus Management Company allocated the biggest weight to Vertex Energy Inc (NASDAQ:VTNR), around 0.41% of its 13F portfolio. Manatuck Hill Partners is also relatively very bullish on the stock, designating 0.29 percent of its 13F equity portfolio to VTNR.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Renaissance Technologies. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Citadel Investment Group).
Let’s go over hedge fund activity in other stocks similar to Vertex Energy Inc (NASDAQ:VTNR). We will take a look at ADDvantage Technologies Group, Inc. (NASDAQ:AEY), Entera Bio Ltd. (NASDAQ:ENTX), Sunesis Pharmaceuticals, Inc. (NASDAQ:SNSS), Ion Geophysical Corp (NYSE:IO), Powerbridge Technologies Co., Ltd. (NASDAQ:PBTS), Globus Maritime Ltd (NASDAQ:GLBS), and Energy Focus Inc (NASDAQ:EFOI). All of these stocks’ market caps are similar to VTNR’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AEY | 2 | 133 | 1 |
| ENTX | 2 | 2187 | 0 |
| SNSS | 6 | 3930 | -1 |
| IO | 3 | 1637 | -2 |
| PBTS | 1 | 78 | -1 |
| GLBS | 2 | 114 | 0 |
| EFOI | 2 | 726 | 1 |
| Average | 2.6 | 1258 | -0.3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 2.6 hedge funds with bullish positions and the average amount invested in these stocks was $1 million. That figure was $3 million in VTNR’s case. Sunesis Pharmaceuticals, Inc. (NASDAQ:SNSS) is the most popular stock in this table. On the other hand Powerbridge Technologies Co., Ltd. (NASDAQ:PBTS) is the least popular one with only 1 bullish hedge fund positions. Vertex Energy Inc (NASDAQ:VTNR) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for VTNR is 80.7. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through November 27th and still beat the market by 16.1 percentage points. Hedge funds were also right about betting on VTNR as the stock returned 48% since the end of Q3 (through 11/27) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Follow Vertex Energy Inc. (NASDAQ:VTNR)
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Disclosure: None. This article was originally published at Insider Monkey.
