Hedge Funds Have Never Been This Bullish On Versum Materials, Inc. (VSM)

As we already know from media reports and hedge fund investor letters, many hedge funds lost money in fourth quarter, blaming macroeconomic conditions and unpredictable events that hit several sectors, with technology among them. Nevertheless, most investors decided to stick to their bullish theses and recouped their losses by the end of the first quarter. We get to see hedge funds’ thoughts towards the market and individual stocks by aggregating their quarterly portfolio movements and reading their investor letters. In this article, we will particularly take a look at what hedge funds think about Versum Materials, Inc. (NYSE:VSM).

Is Versum Materials, Inc. (NYSE:VSM) going to take off soon? Money managers are taking a bullish view. The number of bullish hedge fund positions went up by 14 recently. Our calculations also showed that VSM isn’t among the 30 most popular stocks among hedge funds. VSM was in 43 hedge funds’ portfolios at the end of the first quarter of 2019. There were 29 hedge funds in our database with VSM holdings at the end of the previous quarter.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.

Jeffrey Gates Gates Capital

We’re going to view the recent hedge fund action regarding Versum Materials, Inc. (NYSE:VSM).

What does the smart money think about Versum Materials, Inc. (NYSE:VSM)?

At Q1’s end, a total of 43 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 48% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards VSM over the last 15 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.


The largest stake in Versum Materials, Inc. (NYSE:VSM) was held by Mason Capital Management, which reported holding $94.3 million worth of stock at the end of March. It was followed by Citadel Investment Group with a $92.8 million position. Other investors bullish on the company included Gates Capital Management, Water Island Capital, and Alpine Associates.

As industrywide interest jumped, key hedge funds were leading the bulls’ herd. Mason Capital Management, managed by Kenneth Mario Garschina, assembled the most valuable position in Versum Materials, Inc. (NYSE:VSM). Mason Capital Management had $94.3 million invested in the company at the end of the quarter. John Orrico’s Water Island Capital also made a $76.5 million investment in the stock during the quarter. The following funds were also among the new VSM investors: Robert Emil Zoellner’s Alpine Associates, Anand Parekh’s Alyeska Investment Group, and Daniel S. Och’s OZ Management.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Versum Materials, Inc. (NYSE:VSM) but similarly valued. These stocks are Brixmor Property Group Inc (NYSE:BRX), Pivotal Software, Inc. (NYSE:PVTL), Synovus Financial Corp. (NYSE:SNV), and Ternium S.A. (NYSE:TX). This group of stocks’ market valuations match VSM’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BRX 12 194951 -5
PVTL 25 471743 -7
SNV 41 828060 9
TX 12 81294 0
Average 22.5 394012 -0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 22.5 hedge funds with bullish positions and the average amount invested in these stocks was $394 million. That figure was $1091 million in VSM’s case. Synovus Financial Corp. (NYSE:SNV) is the most popular stock in this table. On the other hand Brixmor Property Group Inc (NYSE:BRX) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Versum Materials, Inc. (NYSE:VSM) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Hedge funds were also right about betting on VSM, though not to the same extent, as the stock returned 1.8% during the same period and outperformed the market as well.

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