Hedge Funds Are Dumping Veeco Instruments Inc. (VECO)

In this article we will take a look at whether hedge funds think Veeco Instruments Inc. (NASDAQ:VECO) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

Is Veeco Instruments Inc. (NASDAQ:VECO) a sound investment now? The smart money is turning less bullish. The number of long hedge fund bets went down by 1 in recent months. Our calculations also showed that VECO 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). VECO was in 14 hedge funds’ portfolios at the end of March. There were 15 hedge funds in our database with VECO holdings at the end of the previous quarter.

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.

Bruce Kovner, Caxton Associates LP

Bruce Kovner of Caxton Associates LP

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, blockchain technology’s influence will go beyond online payments. So, we are checking out this futurist’s moonshot opportunities in tech stocks. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s take a look at the fresh hedge fund action regarding Veeco Instruments Inc. (NASDAQ:VECO).

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

At Q1’s end, a total of 14 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -7% from the fourth quarter of 2019. On the other hand, there were a total of 10 hedge funds with a bullish position in VECO a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is VECO A Good Stock To Buy?

The largest stake in Veeco Instruments Inc. (NASDAQ:VECO) was held by Lynrock Lake, which reported holding $186.2 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $13.6 million position. Other investors bullish on the company included Fisher Asset Management, D E Shaw, and Polar Capital. In terms of the portfolio weights assigned to each position Lynrock Lake allocated the biggest weight to Veeco Instruments Inc. (NASDAQ:VECO), around 18.35% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, dishing out 0.09 percent of its 13F equity portfolio to VECO.

Due to the fact that Veeco Instruments Inc. (NASDAQ:VECO) has experienced declining sentiment from the aggregate hedge fund industry, it’s easy to see that there were a few hedgies that decided to sell off their entire stakes in the first quarter. Interestingly, Israel Englander’s Millennium Management said goodbye to the biggest position of the 750 funds followed by Insider Monkey, worth about $0.7 million in stock, and Bruce Kovner’s Caxton Associates LP was right behind this move, as the fund dumped about $0.4 million worth. These moves are interesting, as total hedge fund interest was cut by 1 funds in the first quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Veeco Instruments Inc. (NASDAQ:VECO) but similarly valued. These stocks are Textainer Group Holdings Limited (NYSE:TGH), DRDGOLD Ltd. (NYSE:DRD), Clovis Oncology Inc (NASDAQ:CLVS), and Atreca, Inc. (NASDAQ:BCEL). This group of stocks’ market values are closest to VECO’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TGH 11 14043 -2
DRD 2 7055 -1
CLVS 13 38106 -2
BCEL 8 118194 1
Average 8.5 44350 -1

View table here if you experience formatting issues.

As you can see these stocks had an average of 8.5 hedge funds with bullish positions and the average amount invested in these stocks was $44 million. That figure was $238 million in VECO’s case. Clovis Oncology Inc (NASDAQ:CLVS) is the most popular stock in this table. On the other hand DRDGOLD Ltd. (NYSE:DRD) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks Veeco Instruments Inc. (NASDAQ:VECO) 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 13.3% in 2020 through June 25th but still managed to beat the market by 16.8 percentage points. Hedge funds were also right about betting on VECO as the stock returned 35.2% so far in Q2 (through June 25th) 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.