The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on March 31st, about a week after the S&P 500 Index bottomed. We at Insider Monkey have made an extensive database of more than 821 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded Varonis Systems Inc (NASDAQ:VRNS) based on those filings.
Is Varonis Systems Inc (NASDAQ:VRNS) a cheap investment right now? Investors who are in the know are in a bullish mood. The number of long hedge fund positions advanced by 2 recently. Our calculations also showed that VRNS isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Noam Gottesman of GLG Partners
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s go over the key hedge fund action regarding Varonis Systems Inc (NASDAQ:VRNS).
How have hedgies been trading Varonis Systems Inc (NASDAQ:VRNS)?
At Q1’s end, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 11% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards VRNS over the last 18 quarters. With the smart money’s sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Cadian Capital, managed by Eric Bannasch, holds the most valuable position in Varonis Systems Inc (NASDAQ:VRNS). Cadian Capital has a $147.8 million position in the stock, comprising 7.3% of its 13F portfolio. The second largest stake is held by SoMa Equity Partners, led by Gil Simon, holding a $79 million position; the fund has 4.4% of its 13F portfolio invested in the stock. Remaining professional money managers with similar optimism encompass Brett Barakett’s Tremblant Capital, David Thomas’s Atalan Capital and John Brennan’s Sirios Capital Management. In terms of the portfolio weights assigned to each position North Run Capital allocated the biggest weight to Varonis Systems Inc (NASDAQ:VRNS), around 8.66% of its 13F portfolio. Cadian Capital is also relatively very bullish on the stock, setting aside 7.27 percent of its 13F equity portfolio to VRNS.
Now, specific money managers were leading the bulls’ herd. Citadel Investment Group, managed by Ken Griffin, created the most valuable position in Varonis Systems Inc (NASDAQ:VRNS). Citadel Investment Group had $8.8 million invested in the company at the end of the quarter. Richard Mashaal’s Rima Senvest Management also made a $2.1 million investment in the stock during the quarter. The other funds with new positions in the stock are Noam Gottesman’s GLG Partners, Paul Tudor Jones’s Tudor Investment Corp, and Bruce Kovner’s Caxton Associates LP.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Varonis Systems Inc (NASDAQ:VRNS) but similarly valued. These stocks are TFI International Inc. (NYSE:TFII), Outfront Media Inc (NYSE:OUT), Cornerstone OnDemand, Inc. (NASDAQ:CSOD), and Sunstone Hotel Investors Inc (NYSE:SHO). This group of stocks’ market caps are closest to VRNS’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TFII | 12 | 41372 | 12 |
| OUT | 30 | 329476 | -1 |
| CSOD | 24 | 505400 | -5 |
| SHO | 19 | 110027 | -3 |
| Average | 21.25 | 246569 | 0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.25 hedge funds with bullish positions and the average amount invested in these stocks was $247 million. That figure was $388 million in VRNS’s case. Outfront Media Inc (NYSE:OUT) is the most popular stock in this table. On the other hand TFI International Inc. (NYSE:TFII) is the least popular one with only 12 bullish hedge fund positions. Varonis Systems Inc (NASDAQ:VRNS) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.2% in 2020 through June 17th and still beat the market by 14.8 percentage points. A small number of hedge funds were also right about betting on VRNS as the stock returned 38.4% during the second quarter and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
