Looking for stocks with high upside potential? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 13.1% in the 2.5 months of 2019 (including dividend payments). Conversely, hedge funds’ 15 preferred S&P 500 stocks generated a return of 19.7% during the same period, with 93% of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds’ stock picks generate superior risk-adjusted returns. That’s why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like Viad Corp (NYSE:VVI).
Viad Corp (NYSE:VVI) was in 15 hedge funds’ portfolios at the end of the fourth quarter of 2018. VVI investors should pay attention to an increase in activity from the world’s largest hedge funds lately. There were 12 hedge funds in our database with VVI holdings at the end of the previous quarter. Our calculations also showed that VVI isn’t among the 30 most popular stocks among hedge funds.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.5% through March 12, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let’s take a gander at the latest hedge fund action surrounding Viad Corp (NYSE:VVI).
How are hedge funds trading Viad Corp (NYSE:VVI)?
At Q4’s end, a total of 15 of the hedge funds tracked by Insider Monkey were long this stock, a change of 25% from one quarter earlier. By comparison, 17 hedge funds held shares or bullish call options in VVI 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.
More specifically, Moab Capital Partners was the largest shareholder of Viad Corp (NYSE:VVI), with a stake worth $75.8 million reported as of the end of December. Trailing Moab Capital Partners was GMT Capital, which amassed a stake valued at $27.8 million. Third Avenue Management, Manatuck Hill Partners, and Cannell Capital were also very fond of the stock, giving the stock large weights in their portfolios.
As industrywide interest jumped, some big names have been driving this bullishness. Cannell Capital, managed by J. Carlo Cannell, created the most valuable position in Viad Corp (NYSE:VVI). Cannell Capital had $3.5 million invested in the company at the end of the quarter. Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital also initiated a $0.7 million position during the quarter. The following funds were also among the new VVI investors: Joel Greenblatt’s Gotham Asset Management, Matthew Hulsizer’s PEAK6 Capital Management, and Jim Simons’s Renaissance Technologies.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Viad Corp (NYSE:VVI) but similarly valued. We will take a look at Summit Hotel Properties Inc (NYSE:INN), Quotient Technology Inc. (NYSE:QUOT), Tivity Health, Inc. (NASDAQ:TVTY), and Lakeland Financial Corporation (NASDAQ:LKFN). All of these stocks’ market caps are closest to VVI’s market cap.
|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 13.75 hedge funds with bullish positions and the average amount invested in these stocks was $76 million. That figure was $127 million in VVI’s case. Tivity Health, Inc. (NASDAQ:TVTY) is the most popular stock in this table. On the other hand Summit Hotel Properties Inc (NYSE:INN) is the least popular one with only 11 bullish hedge fund positions. Viad Corp (NYSE:VVI) 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 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately VVI wasn’t nearly as popular as these 15 stock and hedge funds that were betting on VVI were disappointed as the stock returned 15.5% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.