Is VNO Stock A Buy or Sell?

Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Vornado Realty Trust (NYSE:VNO)? The smart money sentiment can provide an answer to this question.

Is VNO stock a buy? The best stock pickers were becoming hopeful. The number of long hedge fund bets rose by 3 in recent months. Vornado Realty Trust (NYSE:VNO) was in 23 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 37. Our calculations also showed that VNO isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings). There were 20 hedge funds in our database with VNO holdings at the end of September.

At the moment there are a lot of formulas shareholders put to use to evaluate their stock investments. A pair of the less known formulas are hedge fund and insider trading sentiment. Our experts have shown that, historically, those who follow the top picks of the elite money managers can outperform their index-focused peers by a healthy amount (see the details here). Also, our monthly newsletter’s portfolio of long stock picks returned 197% since March 2017 (through March 2021) and beat the S&P 500 Index by 124 percentage points. You can download a sample issue of this newsletter on our website .

Martin Whitman of Third Avenue Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, auto parts business is a recession resistant business, so we are taking a closer look at this discount auto parts stock that is growing at a 196% annualized rate. We go through lists like the 15 best micro-cap stocks to buy now to identify the next stock with 10x upside potential. 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 we’re going to view the recent hedge fund action surrounding Vornado Realty Trust (NYSE:VNO).

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

At fourth quarter’s end, a total of 23 of the hedge funds tracked by Insider Monkey were long this stock, a change of 15% from the previous quarter. By comparison, 31 hedge funds held shares or bullish call options in VNO a year ago. With hedgies’ sentiment swirling, there exists a select group of notable hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Redwood Capital Management, managed by Jonathan Kolatch, holds the largest position in Vornado Realty Trust (NYSE:VNO). Redwood Capital Management has a $41 million position in the stock, comprising 2.5% of its 13F portfolio. The second most bullish fund manager is Renaissance Technologies, with a $31.9 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Other professional money managers with similar optimism encompass Dmitry Balyasny’s Balyasny Asset Management, Ken Griffin’s Citadel Investment Group and Martin Whitman’s Third Avenue Management. In terms of the portfolio weights assigned to each position Mountaineer Partners Management allocated the biggest weight to Vornado Realty Trust (NYSE:VNO), around 6.18% of its 13F portfolio. Hill Winds Capital is also relatively very bullish on the stock, setting aside 4 percent of its 13F equity portfolio to VNO.

With a general bullishness amongst the heavyweights, some big names were breaking ground themselves. Balyasny Asset Management, managed by Dmitry Balyasny, created the biggest position in Vornado Realty Trust (NYSE:VNO). Balyasny Asset Management had $21 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP also made a $8.6 million investment in the stock during the quarter. The following funds were also among the new VNO investors: Mark Lee’s Mountaineer Partners Management, Phill Gross and Robert Atchinson’s Adage Capital Management, and Matthew Crandall Gilman’s Hill Winds Capital.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Vornado Realty Trust (NYSE:VNO) but similarly valued. These stocks are Ares Capital Corporation (NASDAQ:ARCC), Zions Bancorporation, National Association (NASDAQ:ZION), Robert Half International Inc. (NYSE:RHI), National Retail Properties, Inc. (NYSE:NNN), Sealed Air Corporation (NYSE:SEE), Knight-Swift Transportation Holdings Inc. (NYSE:KNX), and Novavax, Inc. (NASDAQ:NVAX). This group of stocks’ market values are closest to VNO’s market value.

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As you can see these stocks had an average of 26.7 hedge funds with bullish positions and the average amount invested in these stocks was $450 million. That figure was $179 million in VNO’s case. Novavax, Inc. (NASDAQ:NVAX) is the most popular stock in this table. On the other hand National Retail Properties, Inc. (NYSE:NNN) is the least popular one with only 14 bullish hedge fund positions. Vornado Realty Trust (NYSE:VNO) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for VNO is 46.2. 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. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.3% in 2021 through April 19th and still beat the market by 0.9 percentage points. A small number of hedge funds were also right about betting on VNO as the stock returned 23.4% since the end of the fourth quarter (through 4/19) and outperformed the market by an even larger margin.

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