Did Hedge Funds Make The Right Call On Verisk Analytics, Inc. (VRSK) ?

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 821 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 March 31st, a week after the market trough. Now, we are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article you are going to find out whether hedge funds thoughtVerisk Analytics, Inc. (NASDAQ:VRSK) was a good investment heading into the second quarter and how the stock traded in comparison to the top hedge fund picks.

Verisk Analytics, Inc. (NASDAQ:VRSK) has experienced a decrease in hedge fund sentiment in recent months. Our calculations also showed that VRSK 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).

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

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Sander Gerber of Hudson Bay Capital

Sander Gerber of Hudson Bay Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so we are checking out this tiny lithium stock. Keeping this in mind we’re going to view the recent hedge fund action surrounding Verisk Analytics, Inc. (NASDAQ:VRSK).

How have hedgies been trading Verisk Analytics, Inc. (NASDAQ:VRSK)?

At Q1’s end, a total of 31 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -6% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards VRSK over the last 18 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is VRSK A Good Stock To Buy?

The largest stake in Verisk Analytics, Inc. (NASDAQ:VRSK) was held by Akre Capital Management, which reported holding $341.3 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $187.3 million position. Other investors bullish on the company included Ako Capital, Junto Capital Management, and Echo Street Capital Management. In terms of the portfolio weights assigned to each position Junto Capital Management allocated the biggest weight to Verisk Analytics, Inc. (NASDAQ:VRSK), around 4.09% of its 13F portfolio. Akre Capital Management is also relatively very bullish on the stock, dishing out 3.32 percent of its 13F equity portfolio to VRSK.

Seeing as Verisk Analytics, Inc. (NASDAQ:VRSK) has witnessed bearish sentiment from hedge fund managers, it’s safe to say that there exists a select few funds who sold off their entire stakes by the end of the first quarter. Interestingly, Dmitry Balyasny’s Balyasny Asset Management dropped the biggest position of the 750 funds tracked by Insider Monkey, comprising an estimated $74.4 million in stock, and Sander Gerber’s Hudson Bay Capital Management was right behind this move, as the fund said goodbye to about $14.5 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest dropped by 2 funds by the end of the first quarter.

Let’s check out hedge fund activity in other stocks similar to Verisk Analytics, Inc. (NASDAQ:VRSK). We will take a look at Public Service Enterprise Group Incorporated (NYSE:PEG), Motorola Solutions Inc (NYSE:MSI), Paychex, Inc. (NASDAQ:PAYX), and O’Reilly Automotive Inc (NASDAQ:ORLY). This group of stocks’ market values are similar to VRSK’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PEG 34 901655 3
MSI 34 308519 -7
PAYX 41 643102 5
ORLY 60 2486584 -4
Average 42.25 1084965 -0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 42.25 hedge funds with bullish positions and the average amount invested in these stocks was $1085 million. That figure was $925 million in VRSK’s case. O’Reilly Automotive Inc (NASDAQ:ORLY) is the most popular stock in this table. On the other hand Public Service Enterprise Group Incorporated (NYSE:PEG) is the least popular one with only 34 bullish hedge fund positions. Compared to these stocks Verisk Analytics, Inc. (NASDAQ:VRSK) is even less popular than PEG. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th but managed to beat the market by 15.5 percentage points. A small number of hedge funds were also right about betting on VRSK, though not to the same extent, as the stock returned 22.3% during the second quarter and outperformed the market as well.

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