Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the second quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of Vertiv Holdings Co (NYSE:VRT) based on that data and determine whether they were really smart about the stock.
Is Vertiv Holdings Co (NYSE:VRT) going to take off soon? The smart money was becoming hopeful. The number of bullish hedge fund positions inched up by 1 lately. Vertiv Holdings Co (NYSE:VRT) was in 40 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 39. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that VRT 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 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 junior gold mining stock. Legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. 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 new hedge fund action regarding Vertiv Holdings Co (NYSE:VRT).
What does smart money think about Vertiv Holdings Co (NYSE:VRT)?
At the end of the second quarter, a total of 40 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 3% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in VRT over the last 20 quarters. With hedgies’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).
More specifically, Eminence Capital was the largest shareholder of Vertiv Holdings Co (NYSE:VRT), with a stake worth $172.8 million reported as of the end of September. Trailing Eminence Capital was Brahman Capital, which amassed a stake valued at $105.5 million. Alyeska Investment Group, Lomas Capital Management, and Locust Wood Capital Advisers 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 Corsair Capital Management allocated the biggest weight to Vertiv Holdings Co (NYSE:VRT), around 11.03% of its 13F portfolio. Brahman Capital is also relatively very bullish on the stock, dishing out 10.21 percent of its 13F equity portfolio to VRT.
As one would reasonably expect, specific money managers have jumped into Vertiv Holdings Co (NYSE:VRT) headfirst. Senator Investment Group, managed by Doug Silverman and Alexander Klabin, initiated the most valuable position in Vertiv Holdings Co (NYSE:VRT). Senator Investment Group had $25.8 million invested in the company at the end of the quarter. Robert Pohly’s Samlyn Capital also made a $11.5 million investment in the stock during the quarter. The other funds with new positions in the stock are Renaissance Technologies, Rob Citrone’s Discovery Capital Management, and Sahm Adrangi’s Kerrisdale Capital.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Vertiv Holdings Co (NYSE:VRT) but similarly valued. We will take a look at MDU Resources Group Inc (NYSE:MDU), MSA Safety Incorporated (NYSE:MSA), Alaska Air Group, Inc. (NYSE:ALK), Cousins Properties Incorporated (NYSE:CUZ), Agora, Inc. (NASDAQ:API), Legg Mason, Inc. (NYSE:LM), and Ritchie Bros. Auctioneers (NYSE:RBA). This group of stocks’ market valuations are similar to VRT’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 24.4 hedge funds with bullish positions and the average amount invested in these stocks was $307 million. That figure was $747 million in VRT’s case. Legg Mason, Inc. (NYSE:LM) is the most popular stock in this table. On the other hand Ritchie Bros. Auctioneers (NYSE:RBA) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks Vertiv Holdings Co (NYSE:VRT) is more popular among hedge funds. Our overall hedge fund sentiment score for VRT is 86. 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 33% in 2020 through the end of August but still managed to beat the market by 23.2 percentage points. Hedge funds were also right about betting on VRT as the stock returned 19.7% 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.
Disclosure: None. This article was originally published at Insider Monkey.