Is Vonage Holdings Corp. (VG) A Good Stock To Buy?

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 Ackman’s recent Valeant losses). However, it is still 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 Vonage Holdings Corp. (NYSE:VG).

Is Vonage Holdings Corp. (NYSE:VG) a sound investment right now? The stock is one of the best performers of the year and so far returned about 60%. Our calculations show that the smart money doesnt’ think that the stock is overvalued and overall the number of hedge funds with bullish Vonage positions have been increasing. The number of long hedge fund bets improved by 3 during the third quarter. At the end of this article we will also compare VG to other stocks including Cohen & Steers, Inc. (NYSE:CNS), Northwest Natural Gas Co (NYSE:NWN), and Stillwater Mining Company (NYSE:SWC) to get a better sense of its popularity.

Hedge fund activity in Vonage Holdings Corp. (NYSE:VG)

Heading into Q4, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 19% from the second quarter. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Renaissance Technologies, founded by billionaire Jim Simons, holds the most valuable position in Vonage Holdings Corp. (NYSE:VG). Renaissance Technologies has a $63.4 million position in the stock, comprising 0.2% of its 13F portfolio. Coming in second is George McCabe of Portolan Capital Management, with a $11.6 million position; the fund has 1.5% of its 13F portfolio invested in the stock. Remaining members of the smart money that hold long positions include mostly quant hedge funds D. E. Shaw’s D E Shaw, Israel Englander’s Millennium Management and Cliff Asness’s AQR Capital Management.

As industrywide interest jumped, some big names were leading the bulls’ herd. HBK Investments, managed by David Costen Haley, created the biggest position in Vonage Holdings Corp. (NYSE:VG). HBK Investments had $2.2 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also made a $1.4 million investment in the stock during the quarter. The other funds with new positions in the stock are Clifford Fox’s Columbus Circle Investors, Peter Algert and Kevin Coldiron’s Algert Coldiron Investors, and Peter Muller’s PDT Partners.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Vonage Holdings Corp. (NYSE:VG) but similarly valued. These stocks are Cohen & Steers, Inc. (NYSE:CNS), Northwest Natural Gas Co (NYSE:NWN), Stillwater Mining Company (NYSE:SWC), and AZZ Inc (NYSE:AZZ). This group of stocks’ market caps are closest to VG’s market cap.

As you can see these stocks had an average of 10.25 hedge funds with bullish positions and the average amount invested in these stocks was $79 million. That figure was $110 million in VG’s case. Cohen & Steers, Inc. (NYSE:CNS) is the most popular stock in this table. On the other hand AZZ Inc (NYSE:AZZ) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Vonage Holdings Corp. (NYSE:VG) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.