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Did Hedge Funds Make The Right Call On Verint Systems Inc. (VRNT)?

At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (see why hell is coming). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Verint Systems Inc. (NASDAQ:VRNT) at the end of the first quarter and determine whether the smart money was really smart about this stock.

Is Verint Systems Inc. (NASDAQ:VRNT) a splendid investment now? Investors who are in the know were becoming more confident. The number of long hedge fund positions improved by 2 recently. Our calculations also showed that VRNT isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). VRNT was in 17 hedge funds’ portfolios at the end of March. There were 15 hedge funds in our database with VRNT holdings at the end of the previous quarter.

Video: Watch our video about the top 5 most popular hedge fund stocks.

Today there are plenty of formulas shareholders put to use to value their stock investments. A duo of the best formulas are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the elite hedge fund managers can outperform their index-focused peers by a very impressive amount (see the details here).

Robert Moses RGM Capital

Robert Moses of RGM Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. With Federal Reserve creating trillions of dollars out of thin air, we believe gold prices will keep increasing. So, we are checking out gold stocks like this small gold mining company. We go through lists like the 10 most profitable companies in America to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Keeping this in mind let’s check out the fresh hedge fund action encompassing Verint Systems Inc. (NASDAQ:VRNT).

Hedge fund activity in Verint Systems Inc. (NASDAQ:VRNT)

At the end of the first quarter, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 13% from the fourth quarter of 2019. On the other hand, there were a total of 22 hedge funds with a bullish position in VRNT 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.

Among these funds, RGM Capital held the most valuable stake in Verint Systems Inc. (NASDAQ:VRNT), which was worth $76.7 million at the end of the third quarter. On the second spot was Fisher Asset Management which amassed $61.3 million worth of shares. Cardinal Capital, Citadel Investment Group, and Winton Capital 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 RGM Capital allocated the biggest weight to Verint Systems Inc. (NASDAQ:VRNT), around 6.02% of its 13F portfolio. Cardinal Capital is also relatively very bullish on the stock, dishing out 2.52 percent of its 13F equity portfolio to VRNT.

With a general bullishness amongst the heavyweights, key hedge funds have jumped into Verint Systems Inc. (NASDAQ:VRNT) headfirst. Citadel Investment Group, managed by Ken Griffin, created the most valuable position in Verint Systems Inc. (NASDAQ:VRNT). Citadel Investment Group had $2.4 million invested in the company at the end of the quarter. Lee Ainslie’s Maverick Capital also initiated a $1 million position during the quarter. The other funds with new positions in the stock are Alec Litowitz and Ross Laser’s Magnetar Capital and Renee Yao’s Neo Ivy Capital.

Let’s now review hedge fund activity in other stocks similar to Verint Systems Inc. (NASDAQ:VRNT). These stocks are Janus Henderson Group plc (NYSE:JHG), nVent Electric plc (NYSE:NVT), Q2 Holdings Inc (NYSE:QTWO), and UniFirst Corp (NYSE:UNF). This group of stocks’ market values resemble VRNT’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
JHG 23 124117 5
NVT 29 453695 1
QTWO 18 217845 -2
UNF 17 75902 -4
Average 21.75 217890 0

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.75 hedge funds with bullish positions and the average amount invested in these stocks was $218 million. That figure was $206 million in VRNT’s case. nVent Electric plc (NYSE:NVT) is the most popular stock in this table. On the other hand UniFirst Corp (NYSE:UNF) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks Verint Systems Inc. (NASDAQ:VRNT) is even less popular than UNF. Hedge funds dodged a bullet by taking a bearish stance towards VRNT. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 18.6% in 2020 through July 27th but managed to beat the market by 17.1 percentage points. Unfortunately VRNT wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); VRNT investors were disappointed as the stock returned 3% since Q1 and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in 2020.

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