Did Hedge Funds Make The Right Call On Visteon Corp (VC) ?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Visteon Corp (NYSE:VC) based on that data and determine whether they were really smart about the stock.

Visteon Corp (NYSE:VC) was in 19 hedge funds’ portfolios at the end of the first quarter of 2020. VC has seen a decrease in support from the world’s most elite money managers in recent months. There were 29 hedge funds in our database with VC holdings at the end of the previous quarter. Our calculations also showed that VC 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.

Richard Driehaus of Driehaus Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Cannabis stocks are roaring back in 2020, so we are checking out this under-the-radar stock. We go through lists like the 10 most profitable companies in the world 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 take a look at the latest hedge fund action surrounding Visteon Corp (NYSE:VC).

How have hedgies been trading Visteon Corp (NYSE:VC)?

Heading into the second quarter of 2020, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -34% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in VC over the last 18 quarters. With hedgies’ capital changing hands, there exists a few noteworthy hedge fund managers who were upping their holdings considerably (or already accumulated large positions).

Is VC A Good Stock To Buy?

Among these funds, Iridian Asset Management held the most valuable stake in Visteon Corp (NYSE:VC), which was worth $48.1 million at the end of the third quarter. On the second spot was Trigran Investments which amassed $25.4 million worth of shares. Citadel Investment Group, Trigran Investments, and Private 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 Trigran Investments allocated the biggest weight to Visteon Corp (NYSE:VC), around 5.58% of its 13F portfolio. Private Capital Management is also relatively very bullish on the stock, designating 3.37 percent of its 13F equity portfolio to VC.

Judging by the fact that Visteon Corp (NYSE:VC) has witnessed falling interest from the smart money, we can see that there exists a select few funds that decided to sell off their positions entirely by the end of the first quarter. It’s worth mentioning that Richard Driehaus’s Driehaus Capital dropped the biggest investment of the 750 funds followed by Insider Monkey, comprising close to $5.3 million in stock, and Jack Woodruff’s Candlestick Capital Management was right behind this move, as the fund dumped about $4.3 million worth. These transactions are intriguing to say the least, as total hedge fund interest dropped by 10 funds by the end of the first quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Visteon Corp (NYSE:VC) but similarly valued. We will take a look at Korn Ferry (NYSE:KFY), ProAssurance Corporation (NYSE:PRA), Silicon Motion Technology Corp. (NASDAQ:SIMO), and Comfort Systems USA, Inc. (NYSE:FIX). All of these stocks’ market caps are closest to VC’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
KFY 20 136009 1
PRA 10 124328 -8
SIMO 18 214067 1
FIX 20 71526 -4
Average 17 136483 -2.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $136 million. That figure was $152 million in VC’s case. Korn Ferry (NYSE:KFY) is the most popular stock in this table. On the other hand ProAssurance Corporation (NYSE:PRA) is the least popular one with only 10 bullish hedge fund positions. Visteon Corp (NYSE:VC) is not the most popular stock in this group but hedge fund interest is still above average. 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 18.6% in 2020 through July 27th but still beat the market by 17.1 percentage points. Hedge funds were also right about betting on VC as the stock returned 57.4% since Q1 and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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