Before putting in our own effort and resources into finding a good investment, we can quickly utilize hedge fund expertise to give us a quick glimpse of whether that stock could make for a good addition to our portfolios. The odds are not exactly stacked in investors’ favor when it comes to beating the market, as evidenced by the fact that less than 49% of the stocks in the S&P 500 did so during the 12-month period ending October 30. The stats were even worse in recent years when most of the advances in the market were due to large gains by FAANG stocks. However, one bright side for individual investors was the strong performance of hedge funds’ top consensus picks. This year hedge funds’ top 30 stock picks outperformed the S&P 500 Index by 4 percentage points through the middle of November. Thus, we can see that the tireless research and efforts of hedge funds to identify winning stocks can work to our advantage when we know how to use the data. While not all of their picks will be winners, our odds are much better following their best stock picks than trying to go it alone.
Is Vocera Communications Inc (NYSE:VCRA) a cheap stock to buy now? Money managers are turning less bullish. The number of long hedge fund positions were trimmed by 4 lately. Our calculations also showed that vcra isn’t among the 30 most popular stocks among hedge funds. VCRA was in 11 hedge funds’ portfolios at the end of the third quarter of 2018. There were 15 hedge funds in our database with VCRA holdings at the end of the previous quarter.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 18 percentage points since May 2014 through December 3, 2018 (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.
Let’s go over the new hedge fund action encompassing Vocera Communications Inc (NYSE:VCRA).
How are hedge funds trading Vocera Communications Inc (NYSE:VCRA)?
At Q3’s end, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of -27% from the second quarter of 2018. On the other hand, there were a total of 16 hedge funds with a bullish position in VCRA at the beginning of this year. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Jim Simons’s Renaissance Technologies has the number one position in Vocera Communications Inc (NYSE:VCRA), worth close to $51.8 million, corresponding to 0.1% of its total 13F portfolio. The second largest stake is held by Two Sigma Advisors, led by John Overdeck and David Siegel, holding a $9.5 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Remaining peers that hold long positions include Paul Marshall and Ian Wace’s Marshall Wace LLP, Jerome Pfund and Michael Sjostrom’s Sectoral Asset Management and D. E. Shaw’s D E Shaw.
Judging by the fact that Vocera Communications Inc (NYSE:VCRA) has witnessed falling interest from the aggregate hedge fund industry, logic holds that there is a sect of fund managers who sold off their positions entirely heading into Q3. It’s worth mentioning that Mark Broach’s Manatuck Hill Partners cut the biggest investment of all the hedgies monitored by Insider Monkey, worth an estimated $6.6 million in call options, and Israel Englander’s Millennium Management was right behind this move, as the fund sold off about $1.2 million worth. These transactions are important to note, as aggregate hedge fund interest fell by 4 funds heading into Q3.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Vocera Communications Inc (NYSE:VCRA) but similarly valued. We will take a look at Benchmark Electronics, Inc. (NYSE:BHE), Chico’s FAS, Inc. (NYSE:CHS), Compass Diversified Holdings LLC (NYSE:CODI), and FARO Technologies, Inc. (NASDAQ:FARO). This group of stocks’ market values are similar to VCRA’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BHE | 13 | 138093 | -5 |
| CHS | 18 | 74700 | -2 |
| CODI | 4 | 6160 | -1 |
| FARO | 12 | 58107 | 1 |
| Average | 11.75 | 69265 | -1.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.75 hedge funds with bullish positions and the average amount invested in these stocks was $69 million. That figure was $91 million in VCRA’s case. Chico’s FAS, Inc. (NYSE:CHS) is the most popular stock in this table. On the other hand Compass Diversified Holdings LLC (NYSE:CODI) is the least popular one with only 4 bullish hedge fund positions. Vocera Communications Inc (NYSE:VCRA) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard CHS might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
