Varian Medical Systems, Inc. (VAR): Are Hedge Funds Right About This Stock?

At Insider Monkey we track the activity of some of the best-performing hedge funds like Appaloosa Management, Baupost, and Third Point because we determined that some of the stocks that they are collectively bullish on can help us generate returns above the broader indices. Out of thousands of stocks that hedge funds invest in, small-caps can provide the best returns over the long term due to the fact that these companies are less efficiently priced and are usually under the radars of mass-media, analysts and dumb money. This is why we follow the smart money moves in the small-cap space.

Varian Medical Systems, Inc. (NYSE:VAR) investors should pay attention to an increase in hedge fund interest lately. VAR was in 27 hedge funds’ portfolios at the end of the third quarter of 2015. There were 22 hedge funds in our database with VAR holdings at the end of the previous quarter. 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 Fortinet Inc (NASDAQ:FTNT), Restaurant Brands International Inc (NYSE:QSR), and Sunoco Logistics Partners L.P. (NYSE:SXL) to gather more data points.

Keeping this in mind, we’re going to take a gander at the key action surrounding Varian Medical Systems, Inc. (NYSE:VAR).

How have hedgies been trading Varian Medical Systems, Inc. (NYSE:VAR)?

Heading into Q4, a total of 27 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 23% from the second quarter. With hedge funds’ capital changing hands, there exists a select group of key hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Generation Investment Management, managed by David Blood and Al Gore, holds the biggest position in Varian Medical Systems, Inc. (NYSE:VAR). Generation Investment Management has a $265.5 million position in the stock, comprising 3.8% of its 13F portfolio. Sitting at the No. 2 spot is Winton Capital Management, managed by David Harding, which holds a $38.7 million position; the fund has 0.3% of its 13F portfolio invested in the stock. Remaining peers with similar optimism comprise Joel Greenblatt’s Gotham Asset Management, Jim Simons’ Renaissance Technologies and John Overdeck and David Siegel’s Two Sigma Advisors.

As aggregate interest increased, key money managers were leading the bulls’ herd. Renaissance Technologies, managed by Jim Simons, created the largest position in Varian Medical Systems, Inc. (NYSE:VAR). Renaissance Technologies had $21 million invested in the company at the end of the quarter. John Overdeck and David Siegel’s Two Sigma Advisors also made a $14.1 million investment in the stock during the quarter. The other funds with new positions in the stock are Anders Hallberg and Carl Bennet’s HealthInvest Partners AB, Israel Englander’s Millennium Management, and Nick Niell’s Arrowgrass Capital Partners.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Varian Medical Systems, Inc. (NYSE:VAR) but similarly valued. These stocks are Fortinet Inc (NASDAQ:FTNT), Restaurant Brands International Inc (NYSE:QSR), Sunoco Logistics Partners L.P. (NYSE:SXL), and Cooper Companies Inc (NYSE:COO). This group of stocks’ market caps are closest to VAR’s market cap.

As you can see these stocks had an average of 25.75 hedge funds with bullish positions and the average amount invested in these stocks was $855 million. That figure was $472 million in VAR’s case. Fortinet Inc (NASDAQ:FTNT) is the most popular stock in this table. On the other hand Sunoco Logistics Partners L.P. (NYSE:SXL) is the least popular one with only 9 bullish hedge fund positions. Varian Medical Systems, Inc. (NYSE:VAR) 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 FTNT might be a better candidate to consider a long position.