We are still in an overall bull market and many stocks that smart money investors were piling into surged in 2019. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 57% each. Hedge funds’ top 3 stock picks returned 44.6% this year and beat the S&P 500 ETFs by nearly 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Veeva Systems Inc (NYSE:VEEV).
Veeva Systems Inc (NYSE:VEEV) has seen a decrease in hedge fund sentiment of late. VEEV was in 33 hedge funds’ portfolios at the end of September. There were 35 hedge funds in our database with VEEV holdings at the end of the previous quarter. Our calculations also showed that VEEV isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
John Overdeck of Two Sigma Advisors
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. Now let’s take a look at the fresh hedge fund action encompassing Veeva Systems Inc (NYSE:VEEV).
What have hedge funds been doing with Veeva Systems Inc (NYSE:VEEV)?
Heading into the fourth quarter of 2019, a total of 33 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -6% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards VEEV over the last 17 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Two Sigma Advisors held the most valuable stake in Veeva Systems Inc (NYSE:VEEV), which was worth $215.5 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $198.7 million worth of shares. Arrowstreet Capital, D E Shaw, and GLG Partners were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Navellier & Associates allocated the biggest weight to Veeva Systems Inc (NYSE:VEEV), around 2.51% of its 13F portfolio. Ratan Capital Group is also relatively very bullish on the stock, setting aside 2.05 percent of its 13F equity portfolio to VEEV.
Seeing as Veeva Systems Inc (NYSE:VEEV) has witnessed a decline in interest from the entirety of the hedge funds we track, it’s safe to say that there is a sect of hedgies that slashed their full holdings last quarter. At the top of the heap, Gabriel Plotkin’s Melvin Capital Management sold off the biggest position of the “upper crust” of funds tracked by Insider Monkey, valued at about $97.3 million in stock. Larry Chen and Terry Zhang’s fund, Tairen Capital, also said goodbye to its stock, about $4.1 million worth. These moves are interesting, as aggregate hedge fund interest was cut by 2 funds last quarter.
Let’s also examine hedge fund activity in other stocks similar to Veeva Systems Inc (NYSE:VEEV). These stocks are American Water Works Company, Inc. (NYSE:AWK), Aptiv PLC (NYSE:APTV), Verisign, Inc. (NASDAQ:VRSN), and Corning Incorporated (NYSE:GLW). This group of stocks’ market valuations are similar to VEEV’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AWK | 35 | 652077 | 12 |
| APTV | 27 | 887545 | 1 |
| VRSN | 30 | 5568484 | -2 |
| GLW | 27 | 203363 | 1 |
| Average | 29.75 | 1827867 | 3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 29.75 hedge funds with bullish positions and the average amount invested in these stocks was $1828 million. That figure was $1020 million in VEEV’s case. American Water Works Company, Inc. (NYSE:AWK) is the most popular stock in this table. On the other hand Aptiv PLC (NYSE:APTV) is the least popular one with only 27 bullish hedge fund positions. Veeva Systems Inc (NYSE:VEEV) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Hedge funds were also right about betting on VEEV as the stock returned 60.2% in 2019 (through December 23rd) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
