The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on March 31st, about a week after the S&P 500 Index bottomed. We at Insider Monkey have made an extensive database of more than 821 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded Verra Mobility Corporation (NASDAQ:VRRM) based on those filings.
Is Verra Mobility Corporation (NASDAQ:VRRM) a sound investment now? The smart money is becoming less hopeful. The number of long hedge fund positions dropped by 10 recently. 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.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 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.
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s analyze the recent hedge fund action surrounding Verra Mobility Corporation (NASDAQ:VRRM).
What does smart money think about Verra Mobility Corporation (NASDAQ:VRRM)?
Heading into the second quarter of 2020, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -30% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards VRRM over the last 18 quarters. With the smart money’s sentiment swirling, there exists an “upper tier” of key hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
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.
Judging by the fact that Verra Mobility Corporation (NASDAQ:VRRM) has faced bearish sentiment from the smart money, it’s easy to see that there exists a select few hedge funds who sold off their positions entirely heading into Q4. Intriguingly, Will Cook’s Sunriver Management dumped the biggest position of all the hedgies watched by Insider Monkey, valued at an estimated $27.2 million in stock. Jeffrey Hoffner’s fund, Engle Capital, also said goodbye to its stock, about $13.6 million worth. These transactions are interesting, as aggregate hedge fund interest dropped by 10 funds heading into Q4.
Let’s also examine 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). All of these stocks’ market caps resemble VRRM’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
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 13.9% in 2020 through June 10th but still managed to beat the market by 14.2 percentage points. Hedge funds were also right about betting on VRRM as the stock returned 65.1% so far in Q2 (through June 10th) 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.
Disclosure: None. This article was originally published at Insider Monkey.