We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. That’s a big deal.This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.
Virtus Investment Partners Inc (NASDAQ:VRTS) was in 16 hedge funds’ portfolios at the end of September. VRTS investors should be aware of a decrease in enthusiasm from smart money recently. There were 17 hedge funds in our database with VRTS holdings at the end of the previous quarter. Our calculations also showed that VRTS isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Nathaniel August of Mangrove Partners
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. Let’s take a peek at the new hedge fund action surrounding Virtus Investment Partners Inc (NASDAQ:VRTS).
What have hedge funds been doing with Virtus Investment Partners Inc (NASDAQ:VRTS)?
At Q3’s end, a total of 16 of the hedge funds tracked by Insider Monkey were long this stock, a change of -6% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards VRTS over the last 17 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Virtus Investment Partners Inc (NASDAQ:VRTS) was held by Mangrove Partners, which reported holding $23 million worth of stock at the end of September. It was followed by Weiss Asset Management with a $22.7 million position. Other investors bullish on the company included D E Shaw, Citadel Investment Group, and Millennium Management. In terms of the portfolio weights assigned to each position AWH Capital allocated the biggest weight to Virtus Investment Partners Inc (NASDAQ:VRTS), around 5.57% of its 13F portfolio. Mangrove Partners is also relatively very bullish on the stock, dishing out 2.78 percent of its 13F equity portfolio to VRTS.
Since Virtus Investment Partners Inc (NASDAQ:VRTS) has witnessed declining sentiment from the aggregate hedge fund industry, it’s easy to see that there is a sect of hedgies that elected to cut their full holdings by the end of the third quarter. At the top of the heap, Noah Levy and Eugene Dozortsev’s Newtyn Management cut the biggest position of the 750 funds monitored by Insider Monkey, totaling about $8.1 million in stock, and J. Carlo Cannell’s Cannell Capital was right behind this move, as the fund cut about $1 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest fell by 1 funds by the end of the third quarter.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Virtus Investment Partners Inc (NASDAQ:VRTS) but similarly valued. These stocks are Forestar Group Inc. (NYSE:FOR), The Providence Service Corporation (NASDAQ:PRSC), Diamond Offshore Drilling Inc (NYSE:DO), and Cardlytics, Inc. (NASDAQ:CDLX). This group of stocks’ market values resemble VRTS’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FOR | 15 | 99738 | 11 |
| PRSC | 15 | 174593 | 1 |
| DO | 14 | 43842 | 1 |
| CDLX | 18 | 154224 | 8 |
| Average | 15.5 | 118099 | 5.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.5 hedge funds with bullish positions and the average amount invested in these stocks was $118 million. That figure was $95 million in VRTS’s case. Cardlytics, Inc. (NASDAQ:CDLX) is the most popular stock in this table. On the other hand Diamond Offshore Drilling Inc (NYSE:DO) is the least popular one with only 14 bullish hedge fund positions. Virtus Investment Partners Inc (NASDAQ:VRTS) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on VRTS, though not to the same extent, as the stock returned 7.2% during the first two months of the fourth quarter and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
