At Insider Monkey, we pore over the filings of nearly 817 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of September 30. In this article, we will use that wealth of knowledge to determine whether or not Varian Medical Systems, Inc. (NYSE:VAR) makes for a good investment right now.
Is VAR a good stock to buy now? Prominent investors were getting more optimistic. The number of long hedge fund positions advanced by 25 lately. Varian Medical Systems, Inc. (NYSE:VAR) was in 52 hedge funds’ portfolios at the end of September. The all time high for this statistics is 32. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that VAR isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). There were 27 hedge funds in our database with VAR positions at the end of the second quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
In the eyes of most investors, hedge funds are viewed as unimportant, old investment tools of years past. While there are greater than 8000 funds with their doors open at present, We hone in on the top tier of this club, about 850 funds. These hedge fund managers command the lion’s share of the smart money’s total asset base, and by following their top equity investments, Insider Monkey has deciphered a few investment strategies that have historically defeated the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy outrun the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 13% since February 2017 (through November 17th) even though the market was up 65% during the same period. We just shared a list of 6 short targets in our latest quarterly update .
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 5 best cheap stocks to buy according to Ray Dalio to identify stocks with upside potential. 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 website. With all of this in mind we’re going to take a look at the key hedge fund action surrounding Varian Medical Systems, Inc. (NYSE:VAR).
How are hedge funds trading Varian Medical Systems, Inc. (NYSE:VAR)?
Heading into the fourth quarter of 2020, a total of 52 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 93% from the second quarter of 2020. Below, you can check out the change in hedge fund sentiment towards VAR over the last 21 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Generation Investment Management was the largest shareholder of Varian Medical Systems, Inc. (NYSE:VAR), with a stake worth $225.1 million reported as of the end of September. Trailing Generation Investment Management was Millennium Management, which amassed a stake valued at $212.9 million. Magnetar Capital, Pentwater Capital Management, and Carlson Capital 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 Halcyon Asset Management allocated the biggest weight to Varian Medical Systems, Inc. (NYSE:VAR), around 6.96% of its 13F portfolio. Havens Advisors is also relatively very bullish on the stock, setting aside 6.21 percent of its 13F equity portfolio to VAR.
Consequently, some big names have been driving this bullishness. Magnetar Capital, managed by Alec Litowitz and Ross Laser, established the biggest position in Varian Medical Systems, Inc. (NYSE:VAR). Magnetar Capital had $164 million invested in the company at the end of the quarter. Matthew Halbower’s Pentwater Capital Management also initiated a $137.6 million position during the quarter. The other funds with brand new VAR positions are Clint Carlson’s Carlson Capital, Carl Tiedemann and Michael Tiedemann’s TIG Advisors, and Robert Emil Zoellner’s Alpine Associates.
Let’s now review hedge fund activity in other stocks similar to Varian Medical Systems, Inc. (NYSE:VAR). We will take a look at Ventas, Inc. (NYSE:VTR), Dover Corporation (NYSE:DOV), Avangrid, Inc. (NYSE:AGR), SS&C Technologies Holdings, Inc. (NASDAQ:SSNC), FirstEnergy Corp. (NYSE:FE), Insulet Corporation (NASDAQ:PODD), and Etsy Inc (NASDAQ:ETSY). This group of stocks’ market values match VAR’s market value.
|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 38.6 hedge funds with bullish positions and the average amount invested in these stocks was $1073 million. That figure was $1699 million in VAR’s case. FirstEnergy Corp. (NYSE:FE) is the most popular stock in this table. On the other hand Avangrid, Inc. (NYSE:AGR) is the least popular one with only 11 bullish hedge fund positions. Varian Medical Systems, Inc. (NYSE:VAR) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for VAR is 82.7. 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. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 31.6% in 2020 through December 2nd and beat the market again by 16 percentage points. Unfortunately VAR wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on VAR were disappointed as the stock returned 1.3% since the end of September (through 12/2) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 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.