Should You Add Verint Systems Inc. (VRNT) to Your Portfolio?

Investing in hedge funds can bring large profits, but it’s not for everybody, since hedge funds are available only for high-net-worth individuals. They generate significant returns for investors to justify their large fees and they allocate a lot of time and employ a complex analysis to determine the best stocks to invest in. A particularly interesting group of stocks that hedge funds like is the small-caps. The huge amount of capital does not allow hedge funds to invest a lot in small-caps, but our research showed that their most popular small-cap ideas are less efficiently priced and generate stronger returns than their large- and mega-cap picks and the broader market. That is why we follow the hedge fund activity in the small-cap space.

Hedge fund interest towards Verint Systems Inc. (NASDAQ:VRNT) shares was flat at the end of last quarter. VRNT was in 21 hedge funds’ portfolios at the end of September. This is usually a negative indicator. 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 Bloomin’ Brands Inc (NASDAQ:BLMN), Pegasystems Inc. (NASDAQ:PEGA), and Pinnacle Financial Partners (NASDAQ:PNFP) to gather more data points.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

With all of this in mind, let’s take a peek at the recent action encompassing Verint Systems Inc. (NASDAQ:VRNT).

How are hedge funds trading Verint Systems Inc. (NASDAQ:VRNT)?

At the end of the third quarter, a total of 21 of the hedge funds tracked by Insider Monkey were bullish on this stock, unchanged from the end of June. Below, you can check out the change in hedge fund sentiment towards VRNT over the last five quarters. With hedgies’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Fisher Asset Management, led by Ken Fisher, holds the largest position in Verint Systems Inc. (NASDAQ:VRNT). Fisher Asset Management has an $80.4 million position in the stock. On Fisher Asset Management’s heels is RGM Capital, managed by Robert G. Moses, which holds a $58.2 million position; the fund has 6.5% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors that hold long positions include John Brennan’ Sirios Capital Management, Ryan Frick and Oliver Evans’ Dorsal Capital Management and Clint Carlson’s Carlson Capital. We should note that two of these hedge funds (RGM Capital and Dorsal Capital Management) are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

Now that we’ve mentioned the most bullish investors, let’s also take a look at some funds that dumped their entire stakes in the stock during the third quarter. Intriguingly, Andrew Feldstein and Stephen Siderow’s Blue Mountain Capital dumped the biggest position of the “upper crust” of funds followed by Insider Monkey, valued at about $9.9 million in stock, and Michael Pollack’s Destrier Capital was right behind this move, as the fund said goodbye to about $4.8 million worth of shares.

Let’s go over hedge fund activity in other stocks similar to Verint Systems Inc. (NASDAQ:VRNT). These stocks are Bloomin’ Brands Inc (NASDAQ:BLMN), Pegasystems Inc. (NASDAQ:PEGA), Pinnacle Financial Partners (NASDAQ:PNFP), and Monro Muffler Brake Inc (NASDAQ:MNRO). This group of stocks’ market valuations match VRNT’s market valuation.

As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $141 million. That figure was $294 million in VRNT’s case. Bloomin’ Brands Inc (NASDAQ:BLMN) is the most popular stock in this table. On the other hand Pinnacle Financial Partners (NASDAQ:PNFP) is the least popular one with only 10 bullish hedge fund positions. Verint Systems Inc. (NASDAQ:VRNT) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard Bloomin’ Brands Inc (NASDAQ:BLMN) might be a better candidate to consider taking a long position in.

Disclosure: None