We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Vista Outdoor Inc (NYSE:VSTO) and determine whether hedge funds skillfully traded this stock.
Is Vista Outdoor Inc (NYSE:VSTO) a good investment now? The smart money was taking an optimistic view. The number of bullish hedge fund bets rose by 3 in recent months. Vista Outdoor Inc (NYSE:VSTO) was in 22 hedge funds’ portfolios at the end of June. The all time high for this statistics is 27. Our calculations also showed that VSTO 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).
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 56 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 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
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 precious metals prices. So, we are checking out this lithium company which could also benefit from the electric car adoption. 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. Now we’re going to go over the new hedge fund action regarding Vista Outdoor Inc (NYSE:VSTO).
How have hedgies been trading Vista Outdoor Inc (NYSE:VSTO)?
At the end of June, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of 16% from the first quarter of 2020. On the other hand, there were a total of 16 hedge funds with a bullish position in VSTO a year ago. With hedgies’ capital changing hands, there exists a few noteworthy hedge fund managers who were upping their stakes significantly (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Gates Capital Management, managed by Jeffrey Gates, holds the largest position in Vista Outdoor Inc (NYSE:VSTO). Gates Capital Management has a $60.8 million position in the stock, comprising 3% of its 13F portfolio. Coming in second is Greenhouse Funds, managed by Joe Milano, which holds a $22.8 million position; 3.4% of its 13F portfolio is allocated to the company. Other members of the smart money with similar optimism comprise Renaissance Technologies, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and Richard Driehaus’s Driehaus Capital. In terms of the portfolio weights assigned to each position Mountain Lake Investment Management allocated the biggest weight to Vista Outdoor Inc (NYSE:VSTO), around 7.43% of its 13F portfolio. Greenhouse Funds is also relatively very bullish on the stock, earmarking 3.41 percent of its 13F equity portfolio to VSTO.
As one would reasonably expect, specific money managers have been driving this bullishness. Greenhouse Funds, managed by Joe Milano, initiated the largest position in Vista Outdoor Inc (NYSE:VSTO). Greenhouse Funds had $22.8 million invested in the company at the end of the quarter. Richard Driehaus’s Driehaus Capital also made a $12 million investment in the stock during the quarter. The following funds were also among the new VSTO investors: Sander Gerber’s Hudson Bay Capital Management, Jonathan Soros’s JS Capital, and Steve Cohen’s Point72 Asset Management.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Vista Outdoor Inc (NYSE:VSTO) but similarly valued. We will take a look at Accelerate Diagnostics Inc (NASDAQ:AXDX), Autolus Therapeutics plc (NASDAQ:AUTL), Amyris Inc (NASDAQ:AMRS), 3D Systems Corporation (NYSE:DDD), Neenah Inc. (NYSE:NP), i3 Verticals, Inc. (NASDAQ:IIIV), and OraSure Technologies, Inc. (NASDAQ:OSUR). This group of stocks’ market valuations resemble VSTO’s market valuation.
|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 15.1 hedge funds with bullish positions and the average amount invested in these stocks was $73 million. That figure was $186 million in VSTO’s case. OraSure Technologies, Inc. (NASDAQ:OSUR) is the most popular stock in this table. On the other hand i3 Verticals, Inc. (NASDAQ:IIIV) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Vista Outdoor Inc (NYSE:VSTO) is more popular among hedge funds. Our overall hedge fund sentiment score for VSTO is 82.4. 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. 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 24.8% in 2020 through the end of September but still managed to beat the market by 19.3 percentage points. Hedge funds were also right about betting on VSTO as the stock returned 39.7% since the end of June 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.