The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. Now, we are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article you are going to find out whether hedge funds thoughtVenator Materials PLC (NYSE:VNTR) was a good investment heading into the second quarter and how the stock traded in comparison to the top hedge fund picks.
Venator Materials PLC (NYSE:VNTR) shareholders have witnessed a decrease in support from the world’s most elite money managers recently. Our calculations also showed that VNTR 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.
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 S&P 500 ETFs by more than 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 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 stocks that are in our short portfolio.
Mason Hawkins of Southeastern Asset Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to analyze the key hedge fund action encompassing Venator Materials PLC (NYSE:VNTR).
What have hedge funds been doing with Venator Materials PLC (NYSE:VNTR)?
Heading into the second quarter of 2020, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -35% from the previous quarter. On the other hand, there were a total of 18 hedge funds with a bullish position in VNTR a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Adage Capital Management, managed by Phill Gross and Robert Atchinson, holds the largest position in Venator Materials PLC (NYSE:VNTR). Adage Capital Management has a $15.7 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Sitting at the No. 2 spot is Mason Hawkins of Southeastern Asset Management, with a $2.5 million position; 0.1% of its 13F portfolio is allocated to the company. Other professional money managers that hold long positions contain Jeremy Hosking’s Hosking Partners, Renaissance Technologies and John Overdeck and David Siegel’s Two Sigma Advisors. In terms of the portfolio weights assigned to each position Jade Capital Advisors allocated the biggest weight to Venator Materials PLC (NYSE:VNTR), around 0.52% of its 13F portfolio. Luminus Management is also relatively very bullish on the stock, dishing out 0.08 percent of its 13F equity portfolio to VNTR.
Because Venator Materials PLC (NYSE:VNTR) has faced declining sentiment from the entirety of the hedge funds we track, logic holds that there lies a certain “tier” of money managers that decided to sell off their full holdings in the first quarter. It’s worth mentioning that Israel Englander’s Millennium Management dropped the biggest position of all the hedgies monitored by Insider Monkey, totaling about $0.7 million in stock, and Bradley Louis Radoff’s Fondren Management was right behind this move, as the fund sold off about $0.6 million worth. These moves are interesting, as total hedge fund interest fell by 6 funds in the first quarter.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Venator Materials PLC (NYSE:VNTR) but similarly valued. We will take a look at Golden Entertainment Inc (NASDAQ:GDEN), Scorpio Bulkers Inc (NYSE:SALT), Brasilagro Cia Brasileira De Propriedades Agricolas (NYSE:LND), and Tiptree Inc. (NASDAQ:TIPT). This group of stocks’ market valuations match VNTR’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| GDEN | 13 | 35561 | -3 |
| SALT | 9 | 10108 | -5 |
| LND | 1 | 35 | 0 |
| TIPT | 4 | 1002 | 1 |
| Average | 6.75 | 11677 | -1.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 6.75 hedge funds with bullish positions and the average amount invested in these stocks was $12 million. That figure was $24 million in VNTR’s case. Golden Entertainment Inc (NASDAQ:GDEN) is the most popular stock in this table. On the other hand Brasilagro Cia Brasileira De Propriedades Agricolas (NYSE:LND) is the least popular one with only 1 bullish hedge fund positions. Venator Materials PLC (NYSE:VNTR) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but 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 12.3% in 2020 through June 30th but beat the market by 15.5 percentage points. Unfortunately VNTR wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on VNTR were disappointed as the stock returned 4.1% during the same time period 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 many of these stocks already outperformed the market so far this year.
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Disclosure: None. This article was originally published at Insider Monkey.
