We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Melvin Capital’s recent GameStop losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Vertiv Holdings Co (NYSE:VRT).
Is Vertiv Holdings Co (NYSE:VRT) a marvelous investment right now? Hedge funds were in a pessimistic mood. The number of long hedge fund bets decreased by 3 in recent months. Vertiv Holdings Co (NYSE:VRT) was in 36 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 51. Our calculations also showed that VRT isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 39 hedge funds in our database with VRT holdings at the end of March.
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Do Hedge Funds Think VRT Is A Good Stock To Buy Now?
At Q2’s end, a total of 36 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -8% from the previous quarter. By comparison, 40 hedge funds held shares or bullish call options in VRT a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Vertiv Holdings Co (NYSE:VRT) was held by Brahman Capital, which reported holding $158.8 million worth of stock at the end of June. It was followed by Senator Investment Group with a $124.1 million position. Other investors bullish on the company included Arrowstreet Capital, Locust Wood Capital Advisers, and Ratan Capital Group. In terms of the portfolio weights assigned to each position Brahman Capital allocated the biggest weight to Vertiv Holdings Co (NYSE:VRT), around 11.73% of its 13F portfolio. Corsair Capital Management is also relatively very bullish on the stock, designating 9.83 percent of its 13F equity portfolio to VRT.
Judging by the fact that Vertiv Holdings Co (NYSE:VRT) has experienced bearish sentiment from the smart money, logic holds that there lies a certain “tier” of hedge funds that decided to sell off their entire stakes in the second quarter. Interestingly, Dmitry Balyasny’s Balyasny Asset Management sold off the biggest position of the “upper crust” of funds followed by Insider Monkey, comprising about $23.4 million in stock, and Sahm Adrangi’s Kerrisdale Capital was right behind this move, as the fund cut about $14.2 million worth. These bearish behaviors are interesting, as total hedge fund interest dropped by 3 funds in the second quarter.
Let’s check out hedge fund activity in other stocks similar to Vertiv Holdings Co (NYSE:VRT). These stocks are Reliance Steel & Aluminum Co. (NYSE:RS), NiSource Inc. (NYSE:NI), Western Alliance Bancorporation (NYSE:WAL), Upstart Holdings, Inc. (NASDAQ:UPST), Americold Realty Trust (NYSE:COLD), First Horizon National Corporation (NYSE:FHN), and Denali Therapeutics Inc. (NASDAQ:DNLI). This group of stocks’ market valuations are similar to VRT’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| RS | 27 | 273896 | 9 |
| NI | 36 | 559849 | 8 |
| WAL | 28 | 188070 | 5 |
| UPST | 21 | 2135453 | 8 |
| COLD | 16 | 530325 | 0 |
| FHN | 27 | 151649 | 0 |
| DNLI | 22 | 300703 | -4 |
| Average | 25.3 | 591421 | 3.7 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 25.3 hedge funds with bullish positions and the average amount invested in these stocks was $591 million. That figure was $904 million in VRT’s case. NiSource Inc. (NYSE:NI) is the most popular stock in this table. On the other hand Americold Realty Trust (NYSE:COLD) is the least popular one with only 16 bullish hedge fund positions. Vertiv Holdings Co (NYSE:VRT) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for VRT is 73.2. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 21.8% in 2021 through October 11th and beat the market again by 4.4 percentage points. Unfortunately VRT wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on VRT were disappointed as the stock returned -18.4% since the end of June (through 10/11) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
Follow Vertiv Holdings Co (NYSE:VRT)
Follow Vertiv Holdings Co (NYSE:VRT)
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Disclosure: None. This article was originally published at Insider Monkey.
