Is VNET Group Inc (VNET) A Good Stock To Buy?

At Insider Monkey, we pore over the filings of nearly 873 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of June 30th. In this article, we will use that wealth of knowledge to determine whether or not VNET Group Inc (NASDAQ:VNET) makes for a good investment right now.

Is VNET a good stock to buy? VNET Group Inc (NASDAQ:VNET) was in 23 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 33. VNET has seen a decrease in hedge fund interest in recent months. There were 30 hedge funds in our database with VNET positions at the end of the first quarter. Our calculations also showed that VNET isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

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 monthly stock picks returned 185.4% since March 2017 and outperformed the S&P 500 ETFs by more than 79 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

James Dinan of York Capital Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Keeping this in mind we’re going to check out the fresh hedge fund action surrounding VNET Group Inc (NASDAQ:VNET).

Do Hedge Funds Think VNET Is A Good Stock To Buy Now?

Heading into the third quarter of 2021, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -23% from one quarter earlier. By comparison, 19 hedge funds held shares or bullish call options in VNET a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, George Yang’s Anatole Investment Management has the most valuable position in VNET Group Inc (NASDAQ:VNET), worth close to $80.2 million, corresponding to 8% of its total 13F portfolio. The second largest stake is held by Bloom Tree Partners, managed by Alok Agrawal, which holds a $57.3 million position; 6% of its 13F portfolio is allocated to the stock. Some other professional money managers that are bullish comprise Robert Boucai’s Newbrook Capital Advisors, James Dinan’s York Capital Management and Steve Cohen’s Point72 Asset Management. In terms of the portfolio weights assigned to each position Anatole Investment Management allocated the biggest weight to VNET Group Inc (NASDAQ:VNET), around 7.99% of its 13F portfolio. Bloom Tree Partners is also relatively very bullish on the stock, designating 6.03 percent of its 13F equity portfolio to VNET.

Seeing as VNET Group Inc (NASDAQ:VNET) has experienced falling interest from the aggregate hedge fund industry, logic holds that there was a specific group of funds who sold off their full holdings by the end of the second quarter. At the top of the heap, Daniel Patrick Gibson’s Sylebra Capital Management dropped the biggest stake of the 750 funds watched by Insider Monkey, valued at about $62.6 million in stock. Josh Resnick’s fund, Jericho Capital Asset Management, also dumped its stock, about $48.6 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest was cut by 7 funds by the end of the second quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as VNET Group Inc (NASDAQ:VNET) but similarly valued. These stocks are Clearway Energy, Inc. (NYSE:CWEN), Welbilt, Inc. (NYSE:WBT), AAON, Inc. (NASDAQ:AAON), Insmed Incorporated (NASDAQ:INSM), Cerevel Therapeutics Holdings, Inc. (NASDAQ:CERE), Vishay Intertechnology, Inc. (NYSE:VSH), and PROG Holdings Inc (NYSE:PRG). This group of stocks’ market valuations are closest to VNET’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 27 hedge funds with bullish positions and the average amount invested in these stocks was $438 million. That figure was $265 million in VNET’s case. Welbilt, Inc. (NYSE:WBT) is the most popular stock in this table. On the other hand AAON, Inc. (NASDAQ:AAON) is the least popular one with only 17 bullish hedge fund positions. VNET Group Inc (NASDAQ:VNET) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for VNET is 30. 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 negative signal and 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 24% in 2021 through October 22nd and surpassed the market again by 1.6 percentage points. Unfortunately VNET wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); VNET investors were disappointed as the stock returned -20.2% since the end of June (through 10/22) 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 most of these stocks already outperformed the market in 2021.

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Disclosure: None. This article was originally published at Insider Monkey.