With the third-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the fourth quarter. One of these stocks was Vereit Inc (NYSE:VER).
Is VER a good stock to buy now? Money managers were getting less bullish. The number of long hedge fund positions dropped by 5 in recent months. Vereit Inc (NYSE:VER) was in 18 hedge funds’ portfolios at the end of September. The all time high for this statistic is 44. Our calculations also showed that VER 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).
Video: Watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 66 percentage points since March 2017 (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 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
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 15 best blue chip stocks to pick the best large-cap stocks to buy. 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. Keeping this in mind we’re going to take a look at the recent hedge fund action encompassing Vereit Inc (NYSE:VER).
Do Hedge Funds Think VER Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -22% from one quarter earlier. On the other hand, there were a total of 37 hedge funds with a bullish position in VER a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Jonathan Kolatch’s Redwood Capital Management has the biggest position in Vereit Inc (NYSE:VER), worth close to $184.4 million, corresponding to 14% of its total 13F portfolio. On Redwood Capital Management’s heels is Stuart J. Zimmer of Zimmer Partners, with a $91.7 million position; 1.4% of its 13F portfolio is allocated to the stock. Other hedge funds and institutional investors with similar optimism consist of Ken Griffin’s Citadel Investment Group, Matthew Barrett’s Glendon Capital Management and Jonathan Litt’s Land & Buildings Investment Management. In terms of the portfolio weights assigned to each position Glendon Capital Management allocated the biggest weight to Vereit Inc (NYSE:VER), around 15.99% of its 13F portfolio. Redwood Capital Management is also relatively very bullish on the stock, setting aside 14.03 percent of its 13F equity portfolio to VER.
Due to the fact that Vereit Inc (NYSE:VER) has faced a decline in interest from the entirety of the hedge funds we track, logic holds that there was a specific group of funds that elected to cut their full holdings by the end of the third quarter. Intriguingly, Daniel Johnson’s Gillson Capital sold off the largest investment of the 750 funds followed by Insider Monkey, worth an estimated $9.9 million in stock. Paul Tudor Jones’s fund, Tudor Investment Corp, also dumped its stock, about $4.2 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest was cut by 5 funds by the end of the third quarter.
Let’s now take a look at hedge fund activity in other stocks similar to Vereit Inc (NYSE:VER). We will take a look at Cree, Inc. (NASDAQ:CREE), AMERCO (NASDAQ:UHAL), IAA, Inc. (NYSE:IAA), Store Capital Corporation (NYSE:STOR), Mohawk Industries, Inc. (NYSE:MHK), GFL Environmental Inc. (NYSE:GFL), and argenx SE (NASDAQ:ARGX). This group of stocks’ market values resemble VER’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 26.9 hedge funds with bullish positions and the average amount invested in these stocks was $766 million. That figure was $544 million in VER’s case. Mohawk Industries, Inc. (NYSE:MHK) is the most popular stock in this table. On the other hand AMERCO (NASDAQ:UHAL) is the least popular one with only 19 bullish hedge fund positions. Compared to these stocks Vereit Inc (NYSE:VER) is even less popular than UHAL. Our overall hedge fund sentiment score for VER is 12.3. 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. Hedge funds clearly dropped the ball on VER as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. A small number of hedge funds were also right about betting on VER as the stock returned 15.5% since Q3 (through December 14th) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.