Were Hedge Funds Right About Verisign, Inc. (VRSN)?

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. We at Insider Monkey have plowed through 867 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of September 30th. Hedge funds’ consensus stock picks performed spectacularly over the last 3 years, but 2022 hasn’t been kind to hedge funds. In this article we look at how hedge funds traded Verisign, Inc. (NASDAQ:VRSN) and determine whether the smart money was really smart about this stock.

Is Verisign, Inc. (NASDAQ:VRSN) undervalued? Investors who are in the know were reducing their bets on the stock. The number of long hedge fund bets retreated by 1 recently. Verisign, Inc. (NASDAQ:VRSN) was in 40 hedge funds’ portfolios at the end of September. The all time high for this statistic is 47. Our calculations also showed that VRSN isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

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. With all of this in mind we’re going to take a look at the fresh hedge fund action encompassing Verisign, Inc. (NASDAQ:VRSN).

Paul Tudor Jones of Tudor Investment Corp

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

At third quarter’s end, a total of 40 of the hedge funds tracked by Insider Monkey were long this stock, a change of -2% from one quarter earlier. By comparison, 46 hedge funds held shares or bullish call options in VRSN a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to Insider Monkey’s hedge fund database, Warren Buffett’s Berkshire Hathaway has the number one position in Verisign, Inc. (NASDAQ:VRSN), worth close to $2.6273 billion, amounting to 0.9% of its total 13F portfolio. Coming in second is Renaissance Technologies, which holds a $947.5 million position; 1.2% of its 13F portfolio is allocated to the stock. Remaining members of the smart money with similar optimism consist of William von Mueffling’s Cantillon Capital Management, D. E. Shaw’s D E Shaw and Sharlyn C. Heslam’s Stockbridge Partners. In terms of the portfolio weights assigned to each position Yost Capital Management allocated the biggest weight to Verisign, Inc. (NASDAQ:VRSN), around 14.77% of its 13F portfolio. Atalan Capital is also relatively very bullish on the stock, dishing out 6.77 percent of its 13F equity portfolio to VRSN.

Seeing as Verisign, Inc. (NASDAQ:VRSN) has experienced a decline in interest from the entirety of the hedge funds we track, it’s safe to say that there exists a select few hedge funds that decided to sell off their positions entirely heading into Q4. Intriguingly, Donald Sussman’s Paloma Partners said goodbye to the largest stake of all the hedgies watched by Insider Monkey, totaling an estimated $6.5 million in stock. Gavin Saitowitz and Cisco J. del Valle’s fund, Prelude Capital (previously Springbok Capital), also said goodbye to its stock, about $3.9 million worth. These transactions are interesting, as total hedge fund interest fell by 1 funds heading into Q4.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Verisign, Inc. (NASDAQ:VRSN) but similarly valued. These stocks are Huntington Bancshares Incorporated (NASDAQ:HBAN), ORIX Corporation (NYSE:IX), Invitation Homes Inc. (NYSE:INVH), Catalent Inc (NYSE:CTLT), Ginkgo Bioworks Holdings Inc. (NYSE:DNA), Royal Caribbean Cruises Ltd. (NYSE:RCL), and Magna International Inc. (NYSE:MGA). All of these stocks’ market caps resemble VRSN’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 28.7 hedge funds with bullish positions and the average amount invested in these stocks was $1280 million. That figure was $5399 million in VRSN’s case. Catalent Inc (NYSE:CTLT) is the most popular stock in this table. On the other hand ORIX Corporation (NYSE:IX) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Verisign, Inc. (NASDAQ:VRSN) is more popular among hedge funds. Our overall hedge fund sentiment score for VRSN is 79.5. 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. 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 returned 29.6% in 2021 and managed to beat the market by another 3.6 percentage points. Hedge funds were also right about betting on VRSN as the stock returned 5.9% since the end of September (through 1/31) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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