Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Is Victory Capital Holdings, Inc. (VCTR) A Good Stock To Buy?

“The global economic environment is very favorable for investors. Economies are generally strong, but not too strong. Employment levels are among the strongest for many decades. Interest rates are paused at very low levels, and the risk of significant increases in the medium term seems low. Financing for transactions is freely available to good borrowers, but not in major excess. Covenants are lighter than they were five years ago, but the extreme excesses seen in the past do not seem prevalent yet today. Despite this apparent ‘goldilocks’ market environment, we continue to worry about a world where politics are polarized almost everywhere, interest rates are low globally, and equity valuations are at their peak,” are the words of Brookfield Asset Management. Brookfield was right about politics as stocks experienced their second worst May since the 1960s due to escalation of trade disputes. We pay attention to what hedge funds are doing in a particular stock before considering a potential investment because it works for us. So let’s take a glance at the smart money sentiment towards Victory Capital Holdings, Inc. (NASDAQ:VCTR) and see how it was affected.

Victory Capital Holdings, Inc. (NASDAQ:VCTR) shareholders have witnessed a decrease in hedge fund sentiment of late. Our calculations also showed that VCTR 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.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (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 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

RENAISSANCE TECHNOLOGIES

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. We’re going to take a gander at the new hedge fund action encompassing Victory Capital Holdings, Inc. (NASDAQ:VCTR).

How are hedge funds trading Victory Capital Holdings, Inc. (NASDAQ:VCTR)?

At the end of the second quarter, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -8% from the first quarter of 2019. On the other hand, there were a total of 7 hedge funds with a bullish position in VCTR a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with VCTR Positions

Among these funds, Impax Asset Management held the most valuable stake in Victory Capital Holdings, Inc. (NASDAQ:VCTR), which was worth $24.4 million at the end of the second quarter. On the second spot was Azora Capital which amassed $22 million worth of shares. Moreover, Renaissance Technologies, BlueMar Capital Management, and Interval Partners were also bullish on Victory Capital Holdings, Inc. (NASDAQ:VCTR), allocating a large percentage of their portfolios to this stock.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Citadel Investment Group. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because none of the 750+ hedge funds tracked by Insider Monkey identified VCTR as a viable investment and initiated a position in the stock.

Let’s also examine hedge fund activity in other stocks similar to Victory Capital Holdings, Inc. (NASDAQ:VCTR). We will take a look at National HealthCare Corporation (NYSE:NHC), Orion Engineered Carbons SA (NYSE:OEC), Sandy Spring Bancorp Inc. (NASDAQ:SASR), and Eidos Therapeutics, Inc. (NASDAQ:EIDX). This group of stocks’ market values are closest to VCTR’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NHC 9 58048 0
OEC 17 269481 -6
SASR 15 83501 1
EIDX 11 221663 3
Average 13 158173 -0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $158 million. That figure was $68 million in VCTR’s case. Orion Engineered Carbons SA (NYSE:OEC) is the most popular stock in this table. On the other hand National HealthCare Corporation (NYSE:NHC) is the least popular one with only 9 bullish hedge fund positions. Victory Capital Holdings, Inc. (NASDAQ:VCTR) 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. 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 VCTR wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); VCTR investors were disappointed as the stock returned -10.2% 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 so far in 2019.

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

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.