While the market driven by short-term sentiment influenced by the accommodative interest rate environment in the US, virus news and stimulus spending, many smart money investors are starting to get cautious towards the current bull run since March, 2020 and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Vista Outdoor Inc (NYSE:VSTO).
Vista Outdoor Inc (NYSE:VSTO) has experienced a decrease in activity from the world’s largest hedge funds in recent months. Vista Outdoor Inc (NYSE:VSTO) was in 23 hedge funds’ portfolios at the end of September. The all time high for this statistic is 28. There were 24 hedge funds in our database with VSTO positions at the end of the second quarter. Our calculations also showed that VSTO isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).
Jeffrey Gates of Gates Capital
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 take a look at the latest hedge fund action surrounding Vista Outdoor Inc (NYSE:VSTO).
Do Hedge Funds Think VSTO Is A Good Stock To Buy Now?
At third quarter’s end, a total of 23 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -4% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards VSTO over the last 25 quarters. With hedgies’ capital changing hands, there exists a select group of notable hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Jeffrey Gates’s Gates Capital Management has the number one position in Vista Outdoor Inc (NYSE:VSTO), worth close to $224.3 million, comprising 6.2% of its total 13F portfolio. Coming in second is Arrowstreet Capital, led by Peter Rathjens, Bruce Clarke and John Campbell, holding a $44.7 million position; 0.1% of its 13F portfolio is allocated to the company. Other peers that hold long positions consist of Joe Milano’s Greenhouse Funds, Dmitry Balyasny’s Balyasny Asset Management and Richard Driehaus’s Driehaus Capital. In terms of the portfolio weights assigned to each position Gates Capital Management allocated the biggest weight to Vista Outdoor Inc (NYSE:VSTO), around 6.17% of its 13F portfolio. Greenhouse Funds is also relatively very bullish on the stock, earmarking 3.05 percent of its 13F equity portfolio to VSTO.
Judging by the fact that Vista Outdoor Inc (NYSE:VSTO) has faced falling interest from hedge fund managers, we can see that there lies a certain “tier” of funds who sold off their positions entirely by the end of the third quarter. Interestingly, Joel Greenblatt’s Gotham Asset Management cut the largest stake of the 750 funds watched by Insider Monkey, totaling about $0.4 million in stock, and Noam Gottesman’s GLG Partners was right behind this move, as the fund said goodbye to about $0.3 million worth. These transactions are intriguing to say the least, as total hedge fund interest was cut by 1 funds by the end of the third quarter.
Let’s also examine hedge fund activity in other stocks similar to Vista Outdoor Inc (NYSE:VSTO). We will take a look at MYT Netherlands Parent B.V. (NYSE:MYTE), JELD-WEN Holding, Inc. (NYSE:JELD), Instil Bio, Inc. (NASDAQ:TIL), Cinemark Holdings, Inc. (NYSE:CNK), Custom Truck One Source Inc. (NYSE:CTOS), Brandywine Realty Trust (NYSE:BDN), and ATA Inc. (NASDAQ:ATAI). This group of stocks’ market caps are similar to VSTO’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MYTE | 9 | 121915 | -9 |
| JELD | 24 | 250469 | 1 |
| TIL | 11 | 510366 | -3 |
| CNK | 26 | 271158 | -6 |
| CTOS | 14 | 64389 | 1 |
| BDN | 8 | 55564 | 1 |
| ATAI | 17 | 109036 | -3 |
| Average | 15.6 | 197557 | -2.6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.6 hedge funds with bullish positions and the average amount invested in these stocks was $198 million. That figure was $407 million in VSTO’s case. Cinemark Holdings, Inc. (NYSE:CNK) is the most popular stock in this table. On the other hand Brandywine Realty Trust (NYSE:BDN) is the least popular one with only 8 bullish hedge fund positions. Vista Outdoor Inc (NYSE:VSTO) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for VSTO is 70.3. 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 31.1% in 2021 through December 9th and beat the market again by 5.1 percentage points. Unfortunately VSTO wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on VSTO were disappointed as the stock returned -1.9% since the end of September (through 12/9) 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 many of these stocks already outperformed the market since 2019.
Follow Vista Outdoor Inc. (NYSE:VSTO)
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Disclosure: None. This article was originally published at Insider Monkey.
