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 Vontier Corporation (NYSE:VNT).
Is VNT stock a buy? The smart money was turning bullish. The number of bullish hedge fund bets went up by 36 in recent months. Vontier Corporation (NYSE:VNT) was in 36 hedge funds’ portfolios at the end of the fourth quarter of 2020. Our calculations also showed that VNT isn’t among the 30 most popular stocks among hedge funds (click for Q4 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 197% since March 2017 and outperformed the S&P 500 ETFs by more than 124 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.
Dan Loeb of Third Point
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 10 best battery stocks to buy 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. Now we’re going to analyze the recent hedge fund action encompassing Vontier Corporation (NYSE:VNT).
Do Hedge Funds Think VNT Is A Good Stock To Buy Now?
At the end of December, a total of 36 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 36 from one quarter earlier. By comparison, 0 hedge funds held shares or bullish call options in VNT a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Jeffrey Gates’s Gates Capital Management has the most valuable position in Vontier Corporation (NYSE:VNT), worth close to $95.6 million, accounting for 2.9% of its total 13F portfolio. The second most bullish fund manager is Citadel Investment Group, led by Ken Griffin, holding a $70.8 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Other professional money managers with similar optimism consist of Benjamin A. Smith’s Laurion Capital Management, Israel Englander’s Millennium Management and Dan Loeb’s Third Point. In terms of the portfolio weights assigned to each position One Fin Capital Management allocated the biggest weight to Vontier Corporation (NYSE:VNT), around 3.72% of its 13F portfolio. DSAM Partners is also relatively very bullish on the stock, dishing out 3.42 percent of its 13F equity portfolio to VNT.
As aggregate interest increased, specific money managers have jumped into Vontier Corporation (NYSE:VNT) headfirst. Gates Capital Management, managed by Jeffrey Gates, initiated the most valuable position in Vontier Corporation (NYSE:VNT). Gates Capital Management had $95.6 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also initiated a $70.8 million position during the quarter. The other funds with brand new VNT positions are Benjamin A. Smith’s Laurion Capital Management, Israel Englander’s Millennium Management, and Dan Loeb’s Third Point.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Vontier Corporation (NYSE:VNT) but similarly valued. These stocks are First Citizens BancShares Inc. (NASDAQ:FCNCA), Silicon Laboratories (NASDAQ:SLAB), Tempur Sealy International Inc. (NYSE:TPX), Virgin Galactic Holdings, Inc. (NYSE:SPCE), Gildan Activewear Inc (NYSE:GIL), MultiPlan Corporation (NYSE:MPLN), and Huntsman Corporation (NYSE:HUN). This group of stocks’ market caps match VNT’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FCNCA | 27 | 351075 | 6 |
| SLAB | 18 | 62750 | -8 |
| TPX | 43 | 1264121 | -3 |
| SPCE | 23 | 114596 | -1 |
| GIL | 17 | 625623 | -1 |
| MPLN | 25 | 477152 | -8 |
| HUN | 29 | 512556 | 5 |
| Average | 26 | 486839 | -1.4 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 26 hedge funds with bullish positions and the average amount invested in these stocks was $487 million. That figure was $590 million in VNT’s case. Tempur Sealy International Inc. (NYSE:TPX) is the most popular stock in this table. On the other hand Gildan Activewear Inc (NYSE:GIL) is the least popular one with only 17 bullish hedge fund positions. Vontier Corporation (NYSE:VNT) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for VNT is 68.5. 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 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 7.9% in 2021 through April 1st and beat the market again by 0.4 percentage points. Unfortunately VNT wasn’t nearly as popular as these 30 stocks and hedge funds that were betting on VNT were disappointed as the stock returned -6.9% since the end of December (through 4/1) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.
