You probably know from experience that there is not as much information on small-cap companies as there is on large companies. Of course, this makes it really hard and difficult for individual investors to make proper and accurate analysis of certain small-cap companies. However, well-known and successful hedge fund investors like Carl Icahn and George Soros hold the necessary resources and abilities to conduct an extensive stock analysis on small-cap stocks, which enable them to make millions of dollars by identifying potential winners within the small-cap galaxy of stocks. This represents the main reason why Insider Monkey takes notice of the hedge fund activity in these overlooked stocks.
Hedge fund interest in Vectrus Inc (NYSE:VEC) shares was flat at the end of last quarter. This is usually a negative indicator. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Sientra Inc (NASDAQ:SIEN), RealNetworks Inc (NASDAQ:RNWK), and Orrstown Financial Services (NASDAQ:ORRF) to gather more data points.
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We care about hedge fund sentiment because historically hedge funds’ stock picks delivered strong risk adjusted returns. There are certain segments of the market where hedge funds’ stock picks performed much better than its benchmarks. For instance, the 30 most popular mid-cap stocks among the best performing hedge funds returned 18% over the last 12 months outpacing S&P 500 Index by more than 10 percentage points. We developed this strategy 2.5 years ago and started sharing its picks in our quarterly newsletter. It bested the S&P 500 Index ETFs by delivering a solid 39% vs. 22% gain for its benchmarks.
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Keeping this in mind, let’s take a look at the key action encompassing Vectrus Inc (NYSE:VEC).
What does the smart money think about Vectrus Inc (NYSE:VEC)?
At the end of the third quarter, a total of 13 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the previous quarter. On the other hand, there were a total of 16 hedge funds with a bullish position in VEC at the beginning of this year. With hedge funds’ sentiment swirling, there exists a select group of key hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).
Of the funds tracked by Insider Monkey, AQR Capital Management, led by Cliff Asness, holds the most valuable position in Vectrus Inc (NYSE:VEC). AQR Capital Management has a $3 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Sitting at the No. 2 spot is Renaissance Technologies, led by Jim Simons, which holds a $0.9 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Remaining members of the smart money with similar optimism contain John Overdeck and David Siegel’s Two Sigma Advisors, D. E. Shaw’s D E Shaw and Mario Gabelli’s GAMCO Investors. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
Judging by the fact that Vectrus Inc (NYSE:VEC) has encountered declining sentiment from hedge fund managers, logic holds that there was a specific group of money managers that decided to sell off their full holdings last quarter. Interestingly, Dmitry Balyasny’s Balyasny Asset Management dropped the biggest stake of the “upper crust” of funds studied by Insider Monkey, worth an estimated $0.4 million in stock, and Israel Englander’s Millennium Management was right behind this move, as the fund cut about $0.4 million worth of shares.
Let’s also examine hedge fund activity in other stocks similar to Vectrus Inc (NYSE:VEC). These stocks are Sientra Inc (NASDAQ:SIEN), RealNetworks Inc (NASDAQ:RNWK), Orrstown Financial Services (NASDAQ:ORRF), and Garrison Capital Inc (NASDAQ:GARS). This group of stocks’ market caps match VEC’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SIEN | 10 | 41761 | 2 |
| RNWK | 5 | 44999 | 0 |
| ORRF | 3 | 20541 | 0 |
| GARS | 3 | 1164 | -1 |
As you can see these stocks had an average of 5.25 hedge funds with bullish positions and the average amount invested in these stocks was $27 million. That figure was $7 million in VEC’s case. Sientra Inc (NASDAQ:SIEN) is the most popular stock in this table. On the other hand Orrstown Financial Services (NASDAQ:ORRF) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Vectrus Inc (NYSE:VEC) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
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