Hedge Funds Warming Up To Vertex Energy Inc (VTNR)

In this article we will check out the progression of hedge fund sentiment towards Vertex Energy Inc (NASDAQ:VTNR) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.

Is Vertex Energy Inc (NASDAQ:VTNR) a safe investment right now? The smart money is taking an optimistic view. The number of long hedge fund bets inched up by 2 lately. Our calculations also showed that VTNR 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.

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 58 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.


Jim Simons of Renaissance Technologies

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to review the recent hedge fund action encompassing Vertex Energy Inc (NASDAQ:VTNR).

Hedge fund activity in Vertex Energy Inc (NASDAQ:VTNR)

At the end of the first quarter, a total of 7 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 40% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards VTNR over the last 18 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.

Is VTNR A Good Stock To Buy?

More specifically, Manatuck Hill Partners was the largest shareholder of Vertex Energy Inc (NASDAQ:VTNR), with a stake worth $1 million reported as of the end of September. Trailing Manatuck Hill Partners was Tensile Capital, which amassed a stake valued at $0.9 million. Trellus Management Company, Prescott Group Capital Management, and Renaissance Technologies 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 Manatuck Hill Partners allocated the biggest weight to Vertex Energy Inc (NASDAQ:VTNR), around 0.93% of its 13F portfolio. Trellus Management Company is also relatively very bullish on the stock, designating 0.87 percent of its 13F equity portfolio to VTNR.

As one would reasonably expect, specific money managers were breaking ground themselves. Trellus Management Company, managed by Adam Usdan, assembled the most valuable position in Vertex Energy Inc (NASDAQ:VTNR). Trellus Management Company had $0.5 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also made a $0 million investment in the stock during the quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Vertex Energy Inc (NASDAQ:VTNR) but similarly valued. We will take a look at Zafgen Inc (NASDAQ:ZFGN), Performance Shipping Inc. (NASDAQ:PSHG), Chicken Soup for the Soul Entertainment, Inc. (NASDAQ:CSSE), and LightPath Technologies, Inc. (NASDAQ:LPTH). This group of stocks’ market valuations are similar to VTNR’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ZFGN 15 13448 2
PSHG 1 364 -1
CSSE 2 7790 0
LPTH 4 2377 2
Average 5.5 5995 0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 5.5 hedge funds with bullish positions and the average amount invested in these stocks was $6 million. That figure was $3 million in VTNR’s case. Zafgen Inc (NASDAQ:ZFGN) is the most popular stock in this table. On the other hand Performance Shipping Inc. (NASDAQ:PSHG) is the least popular one with only 1 bullish hedge fund positions. Vertex Energy Inc (NASDAQ:VTNR) is not the most popular stock in this group but hedge fund interest is still above average. 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 13.9% in 2020 through June 10th but still beat the market by 14.2 percentage points. Hedge funds were also right about betting on VTNR as the stock returned 43.3% in Q2 (through June 10th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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