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Is Verso Corporation (VRS) Going To Burn These Hedge Funds ?

We are still in an overall bull market and many stocks that smart money investors were piling into surged through October 17th. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 45% and 39% respectively. Hedge funds’ top 3 stock picks returned 34.4% this year and beat the S&P 500 ETFs by 13 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Verso Corporation (NYSE:VRS).

Verso Corporation (NYSE:VRS) was in 22 hedge funds’ portfolios at the end of the second quarter of 2019. VRS shareholders have witnessed a decrease in activity from the world’s largest hedge funds recently. There were 24 hedge funds in our database with VRS holdings at the end of the previous quarter. Our calculations also showed that VRS isn’t among the 30 most popular stocks among hedge funds (see the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

In today’s marketplace there are plenty of formulas stock traders have at their disposal to evaluate their stock investments. A pair of the most useful formulas are hedge fund and insider trading activity. We have shown that, historically, those who follow the best picks of the top hedge fund managers can outpace their index-focused peers by a very impressive margin (see the details here).

VRS_oct2019

Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s take a gander at the latest hedge fund action surrounding Verso Corporation (NYSE:VRS).

Hedge fund activity in Verso Corporation (NYSE:VRS)

Heading into the third quarter of 2019, a total of 22 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -8% from the previous quarter. The graph below displays the number of hedge funds with bullish position in VRS over the last 16 quarters. With hedge funds’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).

Howard Marks OAKTREE CAPITAL MANAGEMENT

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, John R. Wagner’s SCW Capital Management has the number one position in Verso Corporation (NYSE:VRS), worth close to $29.7 million, corresponding to 22.1% of its total 13F portfolio. Coming in second is Oaktree Capital Management, managed by Howard Marks, which holds a $25.4 million position; 0.5% of its 13F portfolio is allocated to the company. Remaining professional money managers with similar optimism encompass Chuck Royce’s Royce & Associates, Jonathan Kolatch’s Redwood Capital Management and Charles Paquelet’s Skylands Capital.

Judging by the fact that Verso Corporation (NYSE:VRS) has faced falling interest from the smart money, it’s safe to say that there is a sect of hedgies that decided to sell off their full holdings in the second quarter. Interestingly, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital said goodbye to the largest stake of the 750 funds monitored by Insider Monkey, totaling an estimated $9.1 million in stock. Ken Griffin’s fund, Citadel Investment Group, also cut its stock, about $1.9 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest fell by 2 funds in the second quarter.

Let’s now review hedge fund activity in other stocks similar to Verso Corporation (NYSE:VRS). We will take a look at Autolus Therapeutics plc (NASDAQ:AUTL), Jianpu Technology Inc. (NYSE:JT), China Yuchai International Limited (NYSE:CYD), and Newpark Resources Inc (NYSE:NR). This group of stocks’ market valuations are closest to VRS’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AUTL 13 229680 7
JT 4 34758 -3
CYD 9 67669 0
NR 8 26342 -7
Average 8.5 89612 -0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 8.5 hedge funds with bullish positions and the average amount invested in these stocks was $90 million. That figure was $139 million in VRS’s case. Autolus Therapeutics plc (NASDAQ:AUTL) is the most popular stock in this table. On the other hand Jianpu Technology Inc. (NYSE:JT) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Verso Corporation (NYSE:VRS) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately VRS wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on VRS were disappointed as the stock returned -35% during the third quarter 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 in Q3.

Disclosure: None. This article was originally published at Insider Monkey.

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