Hedge Funds Are Dumping Vector Group Ltd (VGR)

At Insider Monkey we track the activity of some of the best-performing hedge funds like Appaloosa Management, Baupost, and Third Point because we determined that some of the stocks that they are collectively bullish on can help us generate returns above the broader indices. Out of thousands of stocks that hedge funds invest in, small-caps can provide the best returns over the long term due to the fact that these companies are less efficiently priced and are usually under the radars of mass-media, analysts and dumb money. This is why we follow the smart money moves in the small-cap space.

Vector Group Ltd (NYSE:VGR) was in 10 hedge funds’ portfolios at the end of the third quarter of 2016. VGR has seen a decrease in support from the world’s most successful money managers recently. The company was in 10 hedge funds’ portfolios at the end of September. There were 15 hedge funds in our database with VGR positions 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 Masimo Corporation (NASDAQ:MASI), Home Bancshares Inc (NASDAQ:HOMB), and Convergys Corporation (NYSE:CVG) to gather more data points.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

How are hedge funds trading Vector Group Ltd (NYSE:VGR)?

At Q3’s end, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, a drop of 33% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards VGR over the last 5 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Jim Simons’ Renaissance Technologies which is one of the largest hedge funds in the world has the number one position in Vector Group Ltd (NYSE:VGR), worth close to $139.3 million. Coming in second is John Overdeck and David Siegel of Two Sigma Advisors, with a $12.2 million position. Other professional money managers with similar optimism encompass Cliff Asness’ AQR Capital Management, David Rodriguez-Fraile’s BlueMar Capital Management and Robert B. Gillam’s McKinley Capital Management. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

Now that we’ve mentioned the most bullish investors, let’s also take a look at some funds that cut their entire stakes in the stock during the third quarter. It’s worth mentioning that Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital cut the biggest position of all the investors tracked by Insider Monkey, totaling an estimated $22.1 million in stock. D E Shaw also said goodbye to its stock, about $1.8 million worth.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Vector Group Ltd (NYSE:VGR) but similarly valued. We will take a look at Masimo Corporation (NASDAQ:MASI), Home Bancshares Inc (NASDAQ:HOMB), Convergys Corporation (NYSE:CVG), and Horizon Pharma Inc (NASDAQ:HZNP). All of these stocks’ market caps resemble VGR’s market cap.

As you can see these stocks had an average of 22 hedge funds with bullish positions and the average amount invested in these stocks was $269 million. That figure was $165 million in VGR’s case. Horizon Pharma Inc (NASDAQ:HZNP) is the most popular stock in this table. On the other hand Home Bancshares Inc (NASDAQ:HOMB) is the least popular one with only 9 bullish hedge fund positions. Vector Group Ltd (NYSE:VGR) 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 HZNP might be a better candidate to consider taking a long position in.

Disclosure: None