Is VG Stock A Buy or Sell?

In this article we will check out the progression of hedge fund sentiment towards Vonage Holdings Corp. (NYSE:VG) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.

Is VG stock a buy or sell? Vonage Holdings Corp. (NYSE:VG) investors should be aware of an increase in support from the world’s most elite money managers of late. Vonage Holdings Corp. (NYSE:VG) was in 37 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 39. Our calculations also showed that VG isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 124 percentage points since March 2017 (see the details here).

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 10 best battery stocks to buy to identify the next stock with 10x 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. Keeping this in mind we’re going to go over the recent hedge fund action regarding Vonage Holdings Corp. (NYSE:VG).

Do Hedge Funds Think VG Is A Good Stock To Buy Now?

At fourth quarter’s end, a total of 37 of the hedge funds tracked by Insider Monkey were long this stock, a change of 3% from one quarter earlier. On the other hand, there were a total of 35 hedge funds with a bullish position in VG a year ago. With hedgies’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were upping their holdings considerably (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Park West Asset Management, managed by Peter S. Park, holds the number one position in Vonage Holdings Corp. (NYSE:VG). Park West Asset Management has a $103.3 million position in the stock, comprising 2.1% of its 13F portfolio. The second largest stake is held by Legion Partners Asset Management, managed by Ted White and Christopher Kiper, which holds a $70.9 million position; 18.4% of its 13F portfolio is allocated to the stock. Some other peers with similar optimism encompass Wilmot B. Harkey and Daniel Mack’s Nantahala Capital Management, Michael A. Price and Amos Meron’s Empyrean Capital Partners and Bijan Modanlou, Joseph Bou-Saba, and Jayaveera Kodali’s Alta Park Capital. In terms of the portfolio weights assigned to each position Legion Partners Asset Management allocated the biggest weight to Vonage Holdings Corp. (NYSE:VG), around 18.43% of its 13F portfolio. Samjo Capital is also relatively very bullish on the stock, designating 7.03 percent of its 13F equity portfolio to VG.

As industrywide interest jumped, specific money managers have jumped into Vonage Holdings Corp. (NYSE:VG) headfirst. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, assembled the biggest position in Vonage Holdings Corp. (NYSE:VG). Arrowstreet Capital had $15.2 million invested in the company at the end of the quarter. Andrew N. Wiener’s Samjo Capital also made a $8.2 million investment in the stock during the quarter. The only other fund with a brand new VG position is Minhua Zhang’s Weld Capital Management.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Vonage Holdings Corp. (NYSE:VG) but similarly valued. We will take a look at Evoqua Water Technologies Corp. (NYSE:AQUA), NovaGold Resources Inc. (NYSE:NG), Alkermes Plc (NASDAQ:ALKS), Sogou Inc. (NYSE:SOGO), M.D.C. Holdings, Inc. (NYSE:MDC), Casella Waste Systems Inc. (NASDAQ:CWST), and Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL). All of these stocks’ market caps are similar to VG’s market cap.

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As you can see these stocks had an average of 22 hedge funds with bullish positions and the average amount invested in these stocks was $250 million. That figure was $510 million in VG’s case. Alkermes Plc (NASDAQ:ALKS) is the most popular stock in this table. On the other hand Sogou Inc. (NYSE:SOGO) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks Vonage Holdings Corp. (NYSE:VG) is more popular among hedge funds. Our overall hedge fund sentiment score for VG is 84.5. 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. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 7.9% in 2021 through April 1st and still beat the market by 0.4 percentage points. Unfortunately VG wasn’t nearly as popular as these 30 stocks and hedge funds that were betting on VG were disappointed as the stock returned -6.3% since the end of the fourth quarter (through 4/1) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.

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

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