Before we spend days researching a stock idea we’d like to take a look at how hedge funds and billionaire investors recently traded that stock. S&P 500 Index returned about 5.2% during the last 12 months ending October 30, 2015. Less than 49% of the stocks in the index outperformed the index. This means you (or a monkey throwing a dart) have less than an even chance of beating the market by randomly picking a stock. On the other hand, the top 30 S&P 500 stocks among hedge funds at the end of September 2014 had an average return of 9.5% during the same period. Sixty three percent of these 30 stocks outperformed the market. Hedge funds had bad stock picks like everyone else. Micron, which lost 50% over this period, was one of hedge funds’ 30 favorite S&P 500 stocks. Anadarko Petroleum was another failed stock pick which lost more than 26%. So, taking cues from hedge funds isn’t a foolproof strategy, but it seems to work on average. In this article, we will take a look at what hedge funds think about Verastem Inc (NASDAQ:VSTM).
Verastem Inc (NASDAQ:VSTM) was in 4 hedge funds’ portfolios at the end of September. Verastem Inc (NASDAQ:VSTM) has experienced a decrease in activity from the world’s largest hedge funds of late. There were 13 hedge funds in our database with Verastem Inc (NASDAQ:VSTM) holdings at the end of the previous quarter. At the end of this article, we will also compare Verastem Inc (NASDAQ:VSTM) to other stocks, including Bon-Ton Stores, Inc. (NASDAQ:BONT), Gulf Resources, Inc. (NASDAQ:GURE), and Aviat Networks Inc (NASDAQ:AVNW) to get a better sense of its popularity.
Follow Verastem Inc. (NASDAQ:VSTM)
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In today’s marketplace, there is a multitude of signals investors put to use to assess their holdings. A pair of the most innovative signals are hedge fund and insider trading activity. Our experts have shown that, historically, those who follow the best picks of the top investment managers can beat the S&P 500 by a solid margin (see the details here).
With all of this in mind, let’s review the recent action surrounding Verastem Inc (NASDAQ:VSTM).
What does the smart money think about Verastem Inc (NASDAQ:VSTM)?
Heading into Q4, a total of 4 of the hedge funds tracked by Insider Monkey were long this stock, a decline of 69% from the second quarter. With hedgies’ capital changing hands, there exists a select group of key hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Kerr Neilson’s Platinum Asset Management has the number one position in Verastem Inc (NASDAQ:VSTM), worth close to $2.83 million, comprising 0.1% of its total 13F portfolio. The second most bullish fund manager is First Eagle Investment Management, holding a $0.6 million position; less than 0.1% of its 13F portfolio is allocated to the stock. Other peers with similar optimism consist of Michael Hintze’s CQS Cayman LP, and Israel Englander’s Millennium Management.
Judging by the fact that Verastem Inc (NASDAQ:VSTM) has faced a declination in interest from the entirety of the hedge funds we track, it’s easy to see that there exists a select few hedgies who sold off their full holdings in the third quarter. Interestingly, Kevin Kotler’s Broadfin Capital sold off the biggest investment of all the hedgies watched by Insider Monkey, comprising close to $7.9 million in stock, and Robert B. Gillam’s McKinley Capital Management was right behind this move, as the fund cut about $2.2 million worth of shares. These bearish behaviors are important to note, as total hedge fund interest fell by 9 funds in the third quarter.
Let’s go over hedge fund activity in other stocks similar to Verastem Inc (NASDAQ:VSTM). These stocks are Bon-Ton Stores, Inc. (NASDAQ:BONT), Gulf Resources, Inc. (NASDAQ:GURE), Aviat Networks Inc (NASDAQ:AVNW), and Carolina Bank Holding Inc. (NC) (NASDAQ:CLBH). This group of stocks’ market caps resembles Verastem Inc (NASDAQ:VSTM)’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BONT | 8 | 15793 | -1 |
| GURE | 4 | 2603 | 0 |
| AVNW | 5 | 14921 | -1 |
| CLBH | 4 | 10848 | 1 |
As you can see, these stocks had an average of 5 hedge funds with bullish positions and the average amount invested in these stocks was $11 million. That figure was $4 million in Verastem Inc (NASDAQ:VSTM)’s case. Bon-Ton Stores, Inc. (NASDAQ:BONT) is the most popular stock in this table. On the other hand, Gulf Resources, Inc. (NASDAQ:GURE) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Verastem Inc (NASDAQ:VSTM) is even less popular than Gulf Resources, Inc. (NASDAQ:GURE). Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case, more research is warranted.
