We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 835 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of December 31st, 2019. In this article we are going to take a look at smart money sentiment towards Veritex Holdings Inc (NASDAQ:VBTX).
Veritex Holdings Inc (NASDAQ:VBTX) shares haven’t seen a lot of action during the fourth quarter. Overall, hedge fund sentiment was unchanged. The stock was in 10 hedge funds’ portfolios at the end of the fourth quarter of 2019. At the end of this article we will also compare VBTX to other stocks including Perficient, Inc. (NASDAQ:PRFT), Inogen Inc (NASDAQ:INGN), and Office Depot Inc (NYSE:ODP) to get a better sense of its popularity.
Israel Englander of Millennium Management
We leave no stone unturned when looking for the next great investment idea. For example, COVID-19 pandemic is still the main driver of stock prices. So we are checking out this trader’s corona catalyst trades. 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 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 take a look at the recent hedge fund action surrounding Veritex Holdings Inc (NASDAQ:VBTX).
How are hedge funds trading Veritex Holdings Inc (NASDAQ:VBTX)?
At the end of the fourth quarter, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. By comparison, 8 hedge funds held shares or bullish call options in VBTX a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Veritex Holdings Inc (NASDAQ:VBTX) was held by Mendon Capital Advisors, which reported holding $45.3 million worth of stock at the end of September. It was followed by Millennium Management with a $24.7 million position. Other investors bullish on the company included Forest Hill Capital, Elizabeth Park Capital Management, and Basswood Capital. In terms of the portfolio weights assigned to each position Mendon Capital Advisors allocated the biggest weight to Veritex Holdings Inc (NASDAQ:VBTX), around 7.79% of its 13F portfolio. Forest Hill Capital is also relatively very bullish on the stock, earmarking 3.5 percent of its 13F equity portfolio to VBTX.
Due to the fact that Veritex Holdings Inc (NASDAQ:VBTX) has experienced bearish sentiment from hedge fund managers, logic holds that there exists a select few funds that slashed their entire stakes by the end of the third quarter. Interestingly, Renaissance Technologies sold off the largest position of the 750 funds watched by Insider Monkey, comprising close to $1.6 million in stock. Peter Rathjens, Bruce Clarke and John Campbell’s fund, Arrowstreet Capital, also dumped its stock, about $0.7 million worth. These transactions are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Veritex Holdings Inc (NASDAQ:VBTX) but similarly valued. We will take a look at Perficient, Inc. (NASDAQ:PRFT), Inogen Inc (NASDAQ:INGN), Office Depot Inc (NYSE:ODP), and Tri Continental Corporation (NYSE:TY). All of these stocks’ market caps resemble VBTX’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PRFT | 23 | 95456 | 8 |
| INGN | 21 | 169724 | 4 |
| ODP | 16 | 104972 | 0 |
| TY | 2 | 1464 | 1 |
| Average | 15.5 | 92904 | 3.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.5 hedge funds with bullish positions and the average amount invested in these stocks was $93 million. That figure was $89 million in VBTX’s case. Perficient, Inc. (NASDAQ:PRFT) is the most popular stock in this table. On the other hand Tri Continental Corporation (NYSE:TY) is the least popular one with only 2 bullish hedge fund positions. Veritex Holdings Inc (NASDAQ:VBTX) 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. 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 1.0% in 2020 through May 1st but beat the market by 12.9 percentage points. Unfortunately VBTX wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); VBTX investors were disappointed as the stock returned -41.1% during the same time period 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.
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.
