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 Verisk Analytics, Inc. (NASDAQ:VRSK) and determine whether hedge funds skillfully traded this stock.
Verisk Analytics, Inc. (NASDAQ:VRSK) has seen an increase in enthusiasm from smart money of late. Verisk Analytics, Inc. (NASDAQ:VRSK) was in 36 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 34. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that VRSK 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.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 56 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a 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, this “mom” trader turned $2000 into $2 million within 2 years. So, we are checking out her best trade idea of the month. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. 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. With all of this in mind let’s review the recent hedge fund action encompassing Verisk Analytics, Inc. (NASDAQ:VRSK).
What does smart money think about Verisk Analytics, Inc. (NASDAQ:VRSK)?
Heading into the third quarter of 2020, a total of 36 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 16% from one quarter earlier. On the other hand, there were a total of 30 hedge funds with a bullish position in VRSK a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Akre Capital Management held the most valuable stake in Verisk Analytics, Inc. (NASDAQ:VRSK), which was worth $416.7 million at the end of the third quarter. On the second spot was Ako Capital which amassed $160.9 million worth of shares. Impax Asset Management, Echo Street Capital Management, and D E Shaw 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 Akre Capital Management allocated the biggest weight to Verisk Analytics, Inc. (NASDAQ:VRSK), around 3.14% of its 13F portfolio. Ako Capital is also relatively very bullish on the stock, setting aside 2.81 percent of its 13F equity portfolio to VRSK.
Consequently, key money managers were leading the bulls’ herd. Impax Asset Management, managed by Ian Simm, initiated the biggest position in Verisk Analytics, Inc. (NASDAQ:VRSK). Impax Asset Management had $100.2 million invested in the company at the end of the quarter. Renaissance Technologies also initiated a $4.7 million position during the quarter. The other funds with new positions in the stock are David Rodriguez-Fraile’s BlueMar Capital Management, Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.
Let’s now review hedge fund activity in other stocks similar to Verisk Analytics, Inc. (NASDAQ:VRSK). We will take a look at IAC/InterActiveCorp (NASDAQ:IAC), Agilent Technologies Inc. (NYSE:A), Paychex, Inc. (NASDAQ:PAYX), IQVIA Holdings, Inc. (NYSE:IQV), The Hershey Company (NYSE:HSY), CRH PLC (NYSE:CRH), and ING Groep N.V. (NYSE:ING). This group of stocks’ market values resemble VRSK’s market value.
|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 37 hedge funds with bullish positions and the average amount invested in these stocks was $1880 million. That figure was $982 million in VRSK’s case. IQVIA Holdings, Inc. (NYSE:IQV) is the most popular stock in this table. On the other hand CRH PLC (NYSE:CRH) is the least popular one with only 7 bullish hedge fund positions. Verisk Analytics, Inc. (NASDAQ:VRSK) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for VRSK is 64.6. 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 negative signal and 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 33% in 2020 through the end of August and surpassed the market by 23.2 percentage points. Unfortunately VRSK wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); VRSK investors were disappointed as the stock returned 9.7% since Q2 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 most of these stocks already outperformed the market in 2020.
Disclosure: None. This article was originally published at Insider Monkey.