Vera Bradley, Inc. (VRA): Hedge Funds In Wait-and-See Mode

We at Insider Monkey have gone over 821 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, near the height of the coronavirus market crash. In this article, we look at what those funds think of Vera Bradley, Inc. (NASDAQ:VRA) based on that data.

Vera Bradley, Inc. (NASDAQ:VRA) shares haven’t seen a lot of action during the first quarter. Overall, hedge fund sentiment was unchanged. The stock was in 18 hedge funds’ portfolios at the end of March. At the end of this article we will also compare VRA to other stocks including Gold Standard Ventures Corp (NYSE:GSV), Kandi Technolgies Group Inc. (NASDAQ:KNDI), and MMA Capital Holdings Inc. (NASDAQ:MMAC) to get a better sense of its popularity.

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.

Donald Sussman of Paloma Partners

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. 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. Keeping this in mind we’re going to view the latest hedge fund action encompassing Vera Bradley, Inc. (NASDAQ:VRA).

What does smart money think about Vera Bradley, Inc. (NASDAQ:VRA)?

At Q1’s end, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. On the other hand, there were a total of 18 hedge funds with a bullish position in VRA a year ago. With hedgies’ sentiment swirling, there exists a select group of notable hedge fund managers who were upping their stakes considerably (or already accumulated large positions).

Among these funds, Renaissance Technologies held the most valuable stake in Vera Bradley, Inc. (NASDAQ:VRA), which was worth $4.2 million at the end of the third quarter. On the second spot was Woodson Capital Management which amassed $2.1 million worth of shares. Royce & Associates, Arrowstreet Capital, and AQR Capital Management 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 Woodson Capital Management allocated the biggest weight to Vera Bradley, Inc. (NASDAQ:VRA), around 0.29% of its 13F portfolio. Zebra Capital Management is also relatively very bullish on the stock, setting aside 0.08 percent of its 13F equity portfolio to VRA.

Seeing as Vera Bradley, Inc. (NASDAQ:VRA) has experienced bearish sentiment from the aggregate hedge fund industry, it’s safe to say that there lies a certain “tier” of fund managers that slashed their entire stakes last quarter. Interestingly, Jack Ripsteen’s Potrero Capital Research dropped the largest stake of the “upper crust” of funds tracked by Insider Monkey, worth about $1.2 million in stock. Michael Gelband’s fund, ExodusPoint Capital, also cut its stock, about $0.4 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Vera Bradley, Inc. (NASDAQ:VRA) but similarly valued. We will take a look at Gold Standard Ventures Corp (NYSE:GSV), Kandi Technolgies Group Inc. (NASDAQ:KNDI), MMA Capital Holdings Inc. (NASDAQ:MMAC), and SM Energy Company (NYSE:SM). All of these stocks’ market caps are similar to VRA’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 6.25 hedge funds with bullish positions and the average amount invested in these stocks was $7 million. That figure was $15 million in VRA’s case. SM Energy Company (NYSE:SM) is the most popular stock in this table. On the other hand Kandi Technolgies Group Inc. (NASDAQ:KNDI) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Vera Bradley, Inc. (NASDAQ:VRA) is more popular among hedge funds. 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 13.4% in 2020 through June 22nd and still beat the market by 15.9 percentage points. Unfortunately VRA wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on VRA were disappointed as the stock returned 18% during the second quarter (through June 22nd) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

Disclosure: None. This article was originally published at Insider Monkey.