Is Vista Outdoor Inc (VSTO) A Good Stock To Buy?

World-class money managers like Bill Ackman and Barry Rosenstein only invest their wealthy clients’ money after undertaking a rigorous examination of any potential stock. They are particularly successful in this regard when it comes to small-cap stocks, which their peerless research gives them a big information advantage on when it comes to judging their worth. It’s not surprising then that they generate their biggest returns from these stocks and invest more of their money in these stocks on average than other investors. It’s also not surprising then that we pay close attention to these picks ourselves and have built a market-beating investment strategy around them.

Vista Outdoor Inc (NYSE:VSTO) has seen a decrease in support from the world’s most elite money managers recently. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Sensient Technologies Corporation (NYSE:SXT), Ciena Corporation (NASDAQ:CIEN), and Dyax Corp. (NASDAQ:DYAX) to gather more data points.

With all of this in mind, we’re going to analyze the key action encompassing Vista Outdoor Inc (NYSE:VSTO).

What does the smart money think about Vista Outdoor Inc (NYSE:VSTO)?

At Q3’s end, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a change of -9% from one quarter earlier. With the smart money’s positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).

Of the funds tracked by Insider Monkey, David Cohen and Harold Levy’s Iridian Asset Management has the biggest position in Vista Outdoor Inc (NYSE:VSTO), worth close to $154.4 million, corresponding to 1.3% of its total 13F portfolio. On Iridian Asset Management’s heels is Jeffrey Gates of Gates Capital Management, with a $107.9 million position; the fund has 4.2% of its 13F portfolio invested in the stock. Some other peers with similar optimism encompass Anand Parekh’s Alyeska Investment Group, David Costen Haley’s HBK Investments and Christopher A. Winham’s Tide Point Capital.

Since Vista Outdoor Inc (NYSE:VSTO) has faced falling interest from hedge fund managers, it’s easy to see that there lies a certain “tier” of hedgies that elected to cut their entire stakes heading into Q4. Intriguingly, Joel Greenblatt’s Gotham Asset Management said goodbye to the largest stake of the 700 funds watched by Insider Monkey, valued at close to $8.3 million in stock, and David Dreman’s Dreman Value Management was right behind this move, as the fund cut about $3.9 million worth. These moves are important to note, as aggregate hedge fund interest dropped by 2 funds heading into Q4.

Let’s now review hedge fund activity in other stocks similar to Vista Outdoor Inc (NYSE:VSTO). We will take a look at Sensient Technologies Corporation (NYSE:SXT), Ciena Corporation (NASDAQ:CIEN), Dyax Corp. (NASDAQ:DYAX), and G-III Apparel Group, Ltd. (NASDAQ:GIII). All of these stocks’ market caps resemble VSTO’s market cap.

As you can see these stocks had an average of 24.25 hedge funds with bullish positions and the average amount invested in these stocks was $270 million. That figure was $814 million in VSTO’s case. Ciena Corporation (NASDAQ:CIEN) is the most popular stock in this table. On the other hand Sensient Technologies Corporation (NYSE:SXT) is the least popular one with only 14 bullish hedge fund positions. Vista Outdoor Inc (NYSE:VSTO) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard CIEN might be a better candidate to consider a long position.