Do Hedge Funds Love Veeco Instruments Inc. (VECO)?

How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Veeco Instruments Inc. (NASDAQ:VECO) and determine whether hedge funds had an edge regarding this stock.

Is Veeco Instruments Inc. (NASDAQ:VECO) the right investment to pursue these days? The smart money was in a bullish mood. The number of long hedge fund bets advanced by 6 recently. Veeco Instruments Inc. (NASDAQ:VECO) was in 20 hedge funds’ portfolios at the end of June. The all time high for this statistics is 22. Our calculations also showed that VECO isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). There were 14 hedge funds in our database with VECO holdings at the end of March.

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

In the eyes of most traders, hedge funds are seen as slow, outdated investment tools of the past. While there are more than 8000 funds in operation at the moment, Our researchers choose to focus on the moguls of this club, around 850 funds. Most estimates calculate that this group of people administer the lion’s share of all hedge funds’ total capital, and by observing their top investments, Insider Monkey has identified numerous investment strategies that have historically outrun Mr. Market. Insider Monkey’s flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Donald Sussman Paloma Partners

Donald Sussman of Paloma Partners

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we are checking out this junior gold mining stock and we recommended this real estate stock to our monthly premium newsletter subscribers. 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. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. Keeping this in mind let’s take a glance at the recent hedge fund action surrounding Veeco Instruments Inc. (NASDAQ:VECO).

What have hedge funds been doing with Veeco Instruments Inc. (NASDAQ:VECO)?

At the end of June, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a change of 43% from one quarter earlier. On the other hand, there were a total of 11 hedge funds with a bullish position in VECO a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Lynrock Lake held the most valuable stake in Veeco Instruments Inc. (NASDAQ:VECO), which was worth $212.2 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $15.4 million worth of shares. Fisher Asset Management, D E Shaw, and Polar Capital 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 Lynrock Lake allocated the biggest weight to Veeco Instruments Inc. (NASDAQ:VECO), around 16.68% of its 13F portfolio. Polar Capital is also relatively very bullish on the stock, dishing out 0.11 percent of its 13F equity portfolio to VECO.

As aggregate interest increased, key hedge funds have jumped into Veeco Instruments Inc. (NASDAQ:VECO) headfirst. ExodusPoint Capital, managed by Michael Gelband, created the most outsized position in Veeco Instruments Inc. (NASDAQ:VECO). ExodusPoint Capital had $0.4 million invested in the company at the end of the quarter. Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors also initiated a $0.2 million position during the quarter. The other funds with brand new VECO positions are Israel Englander’s Millennium Management, Donald Sussman’s Paloma Partners, and Karim Abbadi and Edward McBride’s Centiva Capital.

Let’s go over hedge fund activity in other stocks similar to Veeco Instruments Inc. (NASDAQ:VECO). These stocks are Westlake Chemical Partners LP (NYSE:WLKP), Tanger Factory Outlet Centers Inc. (NYSE:SKT), H&E Equipment Services, Inc. (NASDAQ:HEES), Abercrombie & Fitch Co. (NYSE:ANF), RPC, Inc. (NYSE:RES), NV5 Global Inc (NASDAQ:NVEE), and Northern Dynasty Minerals Ltd. (NYSE:NAK). This group of stocks’ market valuations match VECO’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
WLKP 4 2466 1
SKT 15 24260 -1
HEES 18 57013 2
ANF 34 185170 11
RES 16 27399 5
NVEE 7 11276 -2
NAK 10 23661 5
Average 14.9 47321 3

View table here if you experience formatting issues.

As you can see these stocks had an average of 14.9 hedge funds with bullish positions and the average amount invested in these stocks was $47 million. That figure was $291 million in VECO’s case. Abercrombie & Fitch Co. (NYSE:ANF) is the most popular stock in this table. On the other hand Westlake Chemical Partners LP (NYSE:WLKP) is the least popular one with only 4 bullish hedge fund positions. Veeco Instruments Inc. (NASDAQ:VECO) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for VECO is 37.3. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 24.8% in 2020 through the end of September and beat the market by 19.3 percentage points. Unfortunately VECO wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on VECO were disappointed as the stock returned -13.5% in Q3 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 many of these stocks already outperformed the market so far this year.

Follow Veeco Instruments Inc (NASDAQ:VECO)

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