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 September 30th. We at Insider Monkey have made an extensive database of nearly 750 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded Veritiv Corp (NYSE:VRTV) based on those filings.
Is Veritiv Corp (NYSE:VRTV) a buy right now? Prominent investors are buying. The number of long hedge fund positions increased by 2 recently. Our calculations also showed that VRTV isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to 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 has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Seth Klarman of Baupost Group
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. 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 also rely on the best performing hedge funds‘ buy/sell signals. We’re going to take a gander at the new hedge fund action encompassing Veritiv Corp (NYSE:VRTV).
How are hedge funds trading Veritiv Corp (NYSE:VRTV)?
At Q3’s end, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 22% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards VRTV over the last 17 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Baupost Group was the largest shareholder of Veritiv Corp (NYSE:VRTV), with a stake worth $64.4 million reported as of the end of September. Trailing Baupost Group was Millennium Management, which amassed a stake valued at $2.9 million. Renaissance Technologies, AQR Capital Management, and D E Shaw 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 Baupost Group allocated the biggest weight to Veritiv Corp (NYSE:VRTV), around 0.73% of its 13F portfolio. PDT Partners is also relatively very bullish on the stock, earmarking 0.02 percent of its 13F equity portfolio to VRTV.
As one would reasonably expect, some big names have been driving this bullishness. Millennium Management, managed by Israel Englander, created the biggest position in Veritiv Corp (NYSE:VRTV). Millennium Management had $2.9 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace also initiated a $0.2 million position during the quarter. The only other fund with a new position in the stock is Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Veritiv Corp (NYSE:VRTV) but similarly valued. These stocks are Seneca Foods Corp (NASDAQ:SENEA), OptiNose, Inc. (NASDAQ:OPTN), Tetraphase Pharmaceuticals Inc (NASDAQ:TTPH), and Drive Shack Inc. (NYSE:DS). This group of stocks’ market values match VRTV’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SENEA | 5 | 16044 | 2 |
| OPTN | 8 | 12280 | 2 |
| TTPH | 2 | 934 | -7 |
| DS | 5 | 5852 | -3 |
| Average | 5 | 8778 | -1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 5 hedge funds with bullish positions and the average amount invested in these stocks was $9 million. That figure was $75 million in VRTV’s case. OptiNose, Inc. (NASDAQ:OPTN) is the most popular stock in this table. On the other hand Tetraphase Pharmaceuticals Inc (NASDAQ:TTPH) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks Veritiv Corp (NYSE:VRTV) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately VRTV wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on VRTV were disappointed as the stock returned 1.4% during the first two months of the fourth quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
