Did Hedge Funds Make The Right Call On Verra Mobility Corporation (VRRM)?

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 thoughtVerra Mobility Corporation (NASDAQ:VRRM) was a good investment heading into the second quarter and how the stock traded in comparison to the top hedge fund picks.

Verra Mobility Corporation (NASDAQ:VRRM) was in 23 hedge funds’ portfolios at the end of the first quarter of 2020. VRRM has experienced a decrease in enthusiasm from smart money of late. There were 33 hedge funds in our database with VRRM holdings at the end of the previous quarter. Our calculations also showed that VRRM 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.

According to most traders, hedge funds are assumed to be worthless, old financial vehicles of yesteryear. While there are over 8000 funds in operation at present, Our experts look at the elite of this group, about 850 funds. Most estimates calculate that this group of people orchestrate the majority of the hedge fund industry’s total capital, and by keeping an eye on their finest equity investments, Insider Monkey has unearthed several investment strategies that have historically defeated the broader indices. Insider Monkey’s flagship short hedge fund strategy surpassed the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .


Jeffrey Ubben of ValueAct Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, on one site we found out that NBA champion Isiah Thomas is now the CEO of this cannabis company. The same site also talks about a snack manufacturer that’s growing at 30% annually. 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. 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 if you have any good ideas send us an email. Keeping this in mind let’s take a look at the fresh hedge fund action encompassing Verra Mobility Corporation (NASDAQ:VRRM).

What does smart money think about Verra Mobility Corporation (NASDAQ:VRRM)?

At Q1’s end, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -30% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in VRRM over the last 18 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Verra Mobility Corporation (NASDAQ:VRRM) was held by ValueAct Capital, which reported holding $42.2 million worth of stock at the end of September. It was followed by Crescent Park Management with a $13 million position. Other investors bullish on the company included Cardinal Capital, SCW Capital Management, and Two Sigma Advisors. In terms of the portfolio weights assigned to each position SCW Capital Management allocated the biggest weight to Verra Mobility Corporation (NASDAQ:VRRM), around 7.66% of its 13F portfolio. Crescent Park Management is also relatively very bullish on the stock, setting aside 3.16 percent of its 13F equity portfolio to VRRM.

Because Verra Mobility Corporation (NASDAQ:VRRM) has experienced declining sentiment from the aggregate hedge fund industry, logic holds that there lies a certain “tier” of fund managers that elected to cut their entire stakes last quarter. Interestingly, Will Cook’s Sunriver Management dumped the biggest position of all the hedgies monitored by Insider Monkey, valued at about $27.2 million in stock, and Jeffrey Hoffner’s Engle Capital was right behind this move, as the fund dumped about $13.6 million worth. These transactions are intriguing to say the least, as total hedge fund interest fell by 10 funds last quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Verra Mobility Corporation (NASDAQ:VRRM). These stocks are BrightView Holdings, Inc. (NYSE:BV), Rush Enterprises, Inc. (NASDAQ:RUSHA), Mobile Mini Inc (NASDAQ:MINI), and SpringWorks Therapeutics, Inc. (NASDAQ:SWTX). This group of stocks’ market caps resemble VRRM’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BV 8 160603 -1
RUSHA 17 43687 -7
MINI 18 58994 -6
SWTX 14 481453 3
Average 14.25 186184 -2.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 14.25 hedge funds with bullish positions and the average amount invested in these stocks was $186 million. That figure was $106 million in VRRM’s case. Mobile Mini Inc (NASDAQ:MINI) is the most popular stock in this table. On the other hand BrightView Holdings, Inc. (NYSE:BV) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Verra Mobility Corporation (NASDAQ:VRRM) is more popular among hedge funds. 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 returned 12.3% in 2020 through June 30th but still managed to beat the market by 15.5 percentage points. Hedge funds were also right about betting on VRRM as the stock returned 44% in Q2 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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