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. However, 63% of hedge funds’ top 30 stock picks from the index did beat the market, and returned nearly twice as much on average as the index. 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.
Verizon Communications Inc. (NYSE:VZ) investors should pay attention to a decrease in enthusiasm from smart money in recent months. Verizon Communications Inc. (NYSE:VZ) was in 59 hedge funds’ portfolios at the end of the third quarter of 2015. There were 62 hedge funds in our database with Verizon Communications Inc. (NYSE:VZ) 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 The Coca-Cola Company (NYSE:KO), Walt Disney Company (NYSE:DIS), and Anheuser Busch InBev NV (ADR) (NYSE:BUD) to gather more data points.
In the eyes of most investors, hedge funds are perceived as underperforming, old investment tools of years past. While there are more than 8000 funds with their doors open at the moment, our researchers hone in on the upper echelon of this group, about 700 funds. These investment experts control the lion’s share of the smart money’s total asset base, and by paying attention to their first-class investments, Insider Monkey has discovered several investment strategies that have historically beaten the S&P 500 index. Insider Monkey’s small-cap hedge fund strategy outperformed the S&P 500 index by 12 percentage points per year for a decade in their back tests.
With all of this in mind, let’s take a look at the fresh action surrounding Verizon Communications Inc. (NYSE:VZ).
How have hedgies been trading Verizon Communications Inc. (NYSE:VZ)?
At the end of September, a total of 59 of the hedge funds tracked by Insider Monkey held long positions in this stock, a drop of 5% from the second quarter. With hedge funds’ capital changing hands, there exists a few noteworthy hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).
According to Insider Monkey’s database, Warren Buffett’s Berkshire Hathaway had the number one position in Verizon Communications Inc. (NYSE:VZ), worth close to $652.7 million, accounting for 0.5% of its total 13F portfolio. Sitting at the No. 2 spot is Soroban Capital Partners, managed by Eric W. Mandelblatt, which held a $543.9 million Call position; 3.9% of its 13F portfolio is allocated to the company. Some other hedge funds with similar optimism comprise Phill Gross and Robert Atchinson’s Adage Capital Management, John Overdeck and David Siegel’s Two Sigma Advisors and Michael Messner’s Seminole Capital (Investment Mgmt).
Seeing as Verizon Communications Inc. (NYSE:VZ) has witnessed falling interest from the aggregate hedge fund industry, we can see that there exists a select few money managers that slashed their positions entirely last quarter. Intriguingly, Gordy Holterman and Derek Dunn’s Overland Advisors said goodbye to the biggest investment of all the hedgies tracked by Insider Monkey, comprising close to $47.1 million in stock. Peter Rathjens, Bruce Clarke and John Campbell’s fund, Arrowstreet Capital, also dumped its stock, about $24.5 million worth. These transactions are interesting, as aggregate hedge fund interest was cut by 3 funds last quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Verizon Communications Inc. (NYSE:VZ) but similarly valued. These stocks are The Coca-Cola Company (NYSE:KO), The Walt Disney Company (NYSE:DIS), Anheuser-Busch InBev NV (ADR) (NYSE:BUD), and Bank of America Corp (NYSE:BAC). This group of stocks’ market caps resemble Verizon Communications Inc. (NYSE:VZ)’s market cap.
|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 65 hedge funds with bullish positions and the average amount invested in these stocks was $8.62 billion, significantly higher than the $2.53 billion in Verizon Communications Inc. (NYSE:VZ)’s case. Bank of America Corp (NYSE:BAC) is the most popular stock in this table, while Verizon Communications Inc. (NYSE:VZ) 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 Bank of America Corp (NYSE:BAC) might be a better candidate to consider a long position.