We have been waiting for this for a year and finally the third quarter ended up showing a nice bump in the performance of small-cap stocks. Both the S&P 500 and Russell 2000 were up since the end of the second quarter, but small-cap stocks outperformed the large-cap stocks by double digits. This is important for hedge funds, which are big supporters of small-cap stocks, because their investors started pulling some of their capital out due to poor recent performance. It is very likely that equity hedge funds will deliver better risk adjusted returns in the second half of this year. In this article we are going to look at how this recent market trend affected the sentiment of hedge funds towards Virtus Investment Partners Inc (NASDAQ:VRTS) , and what that likely means for the prospects of the company and its stock.
Virtus Investment Partners Inc (NASDAQ:VRTS) shareholders have witnessed an increase in support from the world’s most successful money managers recently. VRTS was in 12 hedge funds’ portfolios at the end of September. There were 5 hedge funds in our database with VRTS 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 Saia Inc (NASDAQ:SAIA), City Holding Company (NASDAQ:CHCO), and Gray Television, Inc. (NYSE:GTN) to gather more data points.
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We care about hedge fund sentiment because historically hedge funds’ stock picks delivered strong risk adjusted returns. There are certain segments of the market where hedge funds’ stock picks performed much better than its benchmarks. For instance, the 30 most popular mid-cap stocks among the best performing hedge funds returned 18% over the last 12 months outpacing S&P 500 Index by more than 10 percentage points. We developed this strategy 2.5 years ago and started sharing its picks in our quarterly newsletter. It bested the S&P 500 Index ETFs by delivering a solid 39% vs. 22% gain for its benchmarks.
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With all of this in mind, let’s take a peek at the key action surrounding Virtus Investment Partners Inc (NASDAQ:VRTS).
Hedge fund activity in Virtus Investment Partners Inc (NASDAQ:VRTS)
At Q3’s end, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 140% from the second quarter of 2016. Below, you can check out the change in hedge fund sentiment towards VRTS over the last 5 quarters. With the smart money’s sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Joe Huber’s Huber Capital Management has the largest position in Virtus Investment Partners Inc (NASDAQ:VRTS), worth close to $61.1 million, amounting to 2.4% of its total 13F portfolio. The second largest stake is held by Chuck Royce of Royce & Associates, with a $16.5 million position; 0.1% of its 13F portfolio is allocated to the company. Other peers with similar optimism contain Matthew A. Weatherbie’s Weatherbie Capital, and Richard McGuire’s Marcato Capital Management. We should note that none of these elite funds are among our list of the 100 best performing elite funds which is based on the performance of their 13F long positions in non-microcap stocks.
As industrywide interest jumped, specific money managers were leading the bulls’ herd. Interval Partners, led by Gregg Moskowitz, established the biggest position in Virtus Investment Partners Inc (NASDAQ:VRTS). Interval Partners had $2.3 million invested in the company at the end of the quarter. D E Shaw, one of the biggest hedge funds in the world, also made a $0.6 million investment in the stock during the quarter. The following funds were also among the new VRTS investors: Michael Platt and William Reeves’s BlueCrest Capital Mgmt., Ken Griffin’s Citadel Investment Group, and Israel Englander’s Millennium Management.
Let’s go over hedge fund activity in other stocks similar to Virtus Investment Partners Inc (NASDAQ:VRTS). These stocks are Saia Inc (NASDAQ:SAIA), City Holding Company (NASDAQ:CHCO), Gray Television, Inc. (NYSE:GTN), and Nimble Storage Inc (NYSE:NMBL). This group of stocks’ market valuations resemble VRTS’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SAIA | 11 | 65634 | 2 |
| CHCO | 11 | 41686 | 2 |
| GTN | 17 | 87248 | -3 |
| NMBL | 19 | 182228 | 5 |
As you can see these stocks had an average of 14.5 hedge funds with bullish positions and the average amount invested in these stocks was $94 million. That figure was $102 million in VRTS’s case. Nimble Storage Inc (NYSE:NMBL) is the most popular stock in this table. On the other hand Saia Inc (NASDAQ:SAIA) is the least popular one with only 11 bullish hedge fund positions. Virtus Investment Partners Inc (NASDAQ:VRTS) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard NMBL might be a better candidate to consider taking a long position in.
Disclosure: None
