Was The Smart Money Right About Vertiv Holdings Co (VRT)?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the third quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 6 years and analyze what the smart money thinks of Vertiv Holdings Co (NYSE:VRT) based on that data and determine whether they were really smart about the stock.

Hedge fund interest in Vertiv Holdings Co (NYSE:VRT) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that VRT isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings). 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 Knight-Swift Transportation Holdings Inc. (NYSE:KNX), Hyatt Hotels Corporation (NYSE:H), and IPG Photonics Corporation (NASDAQ:IPGP) to gather more data points.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Now let’s analyze the latest hedge fund action encompassing Vertiv Holdings Co (NYSE:VRT).

Steven Cohen of Point72 Asset Management

Do Hedge Funds Think VRT Is A Good Stock To Buy Now?

Heading into the fourth quarter of 2021, a total of 36 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the previous quarter. The graph below displays the number of hedge funds with bullish position in VRT over the last 25 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, Brahman Capital held the most valuable stake in Vertiv Holdings Co (NYSE:VRT), which was worth $137.3 million at the end of the third quarter. On the second spot was Senator Investment Group which amassed $109.5 million worth of shares. Arrowstreet Capital, Locust Wood Capital Advisers, and Impax Asset 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 SAYA Management allocated the biggest weight to Vertiv Holdings Co (NYSE:VRT), around 10.6% of its 13F portfolio. Brahman Capital is also relatively very bullish on the stock, setting aside 10.05 percent of its 13F equity portfolio to VRT.

Due to the fact that Vertiv Holdings Co (NYSE:VRT) has faced a decline in interest from the smart money, we can see that there were a few fund managers that elected to cut their positions entirely heading into Q4. It’s worth mentioning that Mark Kingdon’s Kingdon Capital dropped the biggest position of all the hedgies monitored by Insider Monkey, totaling close to $18.3 million in stock, and Simon Sadler’s Segantii Capital was right behind this move, as the fund sold off about $12 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s go over hedge fund activity in other stocks similar to Vertiv Holdings Co (NYSE:VRT). These stocks are Knight-Swift Transportation Holdings Inc. (NYSE:KNX), Hyatt Hotels Corporation (NYSE:H), IPG Photonics Corporation (NASDAQ:IPGP), DXC Technology Company (NYSE:DXC), Bright Horizons Family Solutions Inc (NYSE:BFAM), Gerdau SA (NYSE:GGB), and Aramark (NYSE:ARMK). This group of stocks’ market values are similar to VRT’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 25.6 hedge funds with bullish positions and the average amount invested in these stocks was $545 million. That figure was $811 million in VRT’s case. Hyatt Hotels Corporation (NYSE:H) is the most popular stock in this table. On the other hand Gerdau SA (NYSE:GGB) is the least popular one with only 13 bullish hedge fund positions. Vertiv Holdings Co (NYSE:VRT) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for VRT is 74.1. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 29.6% in 2021 and beat the market again by 3.6 percentage points. Unfortunately, VRT wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on VRT were disappointed as the stock returned -13.4% since the end of September (through 1/31) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as all of these stocks already outperformed the market since 2019.

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