Hedge fund managers like David Einhorn, Dan Loeb, or Carl Icahn became billionaires through reaping large profits for their investors, which is why piggybacking their stock picks may provide us with significant returns as well. Many hedge funds, like Paul Singer’s Elliott Management, are pretty secretive, but we can still get some insights by analyzing their quarterly 13F filings. One of the most fertile grounds for large abnormal returns is hedge funds’ most popular small-cap picks, which are not so widely followed and often trade at a discount to their intrinsic value. In this article we will check out hedge fund activity in another small-cap stock: VeriFone Systems Inc (NYSE:PAY).
VeriFone Systems Inc (NYSE:PAY) was in 27 hedge funds’ portfolios at the end of the third quarter of 2015. PAY shareholders have witnessed an increase in enthusiasm from smart money in recent months. There were 24 hedge funds in our database with PAY positions at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as New Oriental Education & Tech Grp (ADR) (NYSE:EDU), Elbit Systems Ltd. (USA) (NASDAQ:ESLT), and Post Properties Inc (NYSE:PPS) to gather more data points.
In today’s marketplace there are many metrics stock traders use to appraise stocks. A couple of the most useful metrics are hedge fund and insider trading signals. Hedge fund experts at Insider Monkey have shown that, historically, those who follow the top picks of the best money managers can outpace the S&P 500 by a very impressive margin (see the details here).
With all of this in mind, we’re going to check out the latest action surrounding VeriFone Systems Inc (NYSE:PAY).
What does the smart money think about VeriFone Systems Inc (NYSE:PAY)?
Heading into Q4, a total of 27 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 13% from one quarter earlier. With hedgies’ capital changing hands, there exists a few noteworthy hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Israel Englander’s Millennium Management has the most valuable position in VeriFone Systems Inc (NYSE:PAY), worth close to $37.6 million, accounting for 0.1% of its total 13F portfolio. The second most bullish hedge fund manager is Ascend Capital, led by Malcolm Fairbairn, holding a $34.1 million position; the fund has 1.3% of its 13F portfolio invested in the stock. Remaining members of the smart money with similar optimism comprise Jim Simons’s Renaissance Technologies, Ken Griffin’s Citadel Investment Group and Glenn Russell Dubin’s Highbridge Capital Management.
As aggregate interest increased, key money managers were leading the bulls’ herd. Renaissance Technologies created the most outsized position in VeriFone Systems Inc (NYSE:PAY). Renaissance Technologies had $14.1 million invested in the company at the end of the quarter. Highbridge Capital Management also initiated a $5.8 million position during the quarter. The other funds with brand new PAY positions are Paul Marshall and Ian Wace’s Marshall Wace LLP, Chao Ku’s Nine Chapters Capital Management, and John Overdeck and David Siegel’s Two Sigma Advisors.
Let’s also take a look at hedge fund activity in other stocks similar to VeriFone Systems Inc (NYSE:PAY). We will take a look at New Oriental Education & Tech Grp (ADR) (NYSE:EDU), Elbit Systems Ltd. (USA) (NASDAQ:ESLT), Post Properties Inc (NYSE:PPS), and Air Lease Corp (NYSE:AL). This group of stocks’ market values are closest to PAY’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $216 million. Air Lease Corp (NYSE:AL) is the most popular stock in this table. On the other hand Elbit Systems Ltd. (USA) (NASDAQ:ESLT) is the least popular one with only 4 bullish hedge fund positions. VeriFone Systems Inc (NYSE:PAY) is not the most popular stock in this group but hedge fund interest is still near the top. This is a positive signal but we’d rather spend our time researching stocks that hedge funds have larger positions. In this regard AL might be a better candidate to consider a long position.