Here is What Hedge Funds Think About Valvoline Inc. (VVV)

We at Insider Monkey have gone over 873 13F filings that hedge funds and prominent investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of June 30th. In this article, we look at what those funds think of Valvoline Inc. (NYSE:VVV) based on that data.

Valvoline Inc. (NYSE:VVV) investors should pay attention to an increase in support from the world’s most elite money managers of late. Valvoline Inc. (NYSE:VVV) was in 26 hedge funds’ portfolios at the end of June. The all time high for this statistic is 40. There were 23 hedge funds in our database with VVV holdings at the end of March. Our calculations also showed that VVV isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

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 79 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind let’s take a glance at the recent hedge fund action encompassing Valvoline Inc. (NYSE:VVV).

Do Hedge Funds Think VVV Is A Good Stock To Buy Now?

At second quarter’s end, a total of 26 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 13% from the previous quarter. The graph below displays the number of hedge funds with bullish position in VVV over the last 24 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Brave Warrior Capital was the largest shareholder of Valvoline Inc. (NYSE:VVV), with a stake worth $246.2 million reported as of the end of June. Trailing Brave Warrior Capital was Renaissance Technologies, which amassed a stake valued at $84 million. Tensile Capital, Hawk Ridge Management, and Freshford Capital Management 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 Tensile Capital allocated the biggest weight to Valvoline Inc. (NYSE:VVV), around 9.07% of its 13F portfolio. Brave Warrior Capital is also relatively very bullish on the stock, dishing out 8.45 percent of its 13F equity portfolio to VVV.

As industrywide interest jumped, key money managers were breaking ground themselves. Segantii Capital, managed by Simon Sadler, assembled the most valuable position in Valvoline Inc. (NYSE:VVV). Segantii Capital had $13 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also made a $5.5 million investment in the stock during the quarter. The other funds with new positions in the stock are Alexander Mitchell’s Scopus Asset Management, Brian J. Higgins’s King Street Capital, and Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Valvoline Inc. (NYSE:VVV) but similarly valued. These stocks are Clover Health Investments, Corp. (NASDAQ:CLOV), HUTCHMED (China) Limited (NASDAQ:HCM), The Descartes Systems Group Inc (NASDAQ:DSGX), Healthcare Trust Of America Inc (NYSE:HTA), South State Corporation (NASDAQ:SSB), Nordstrom, Inc. (NYSE:JWN), and Shell Midstream Partners LP (NYSE:SHLX). All of these stocks’ market caps resemble VVV’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 17.7 hedge funds with bullish positions and the average amount invested in these stocks was $398 million. That figure was $644 million in VVV’s case. Nordstrom, Inc. (NYSE:JWN) is the most popular stock in this table. On the other hand Shell Midstream Partners LP (NYSE:SHLX) is the least popular one with only 4 bullish hedge fund positions. Valvoline Inc. (NYSE:VVV) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for VVV is 68.2. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24.9% in 2021 through October 15th and still beat the market by 4.5 percentage points. Hedge funds were also right about betting on VVV as the stock returned 8% since the end of Q2 (through 10/15) 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.