Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Venator Materials PLC (NYSE:VNTR).
Is VNTR a good stock to buy now? Venator Materials PLC (NYSE:VNTR) has seen an increase in hedge fund interest lately. Venator Materials PLC (NYSE:VNTR) was in 10 hedge funds’ portfolios at the end of September. The all time high for this statistics is 21. Our calculations also showed that VNTR isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
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 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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 let’s view the key hedge fund action surrounding Venator Materials PLC (NYSE:VNTR).
Do Hedge Funds Think VNTR Is A Good Stock To Buy Now?
At the end of September, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 11% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards VNTR over the last 21 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).
The largest stake in Venator Materials PLC (NYSE:VNTR) was held by Adage Capital Management, which reported holding $15.7 million worth of stock at the end of September. It was followed by Hosking Partners with a $1.1 million position. Other investors bullish on the company included Jade Capital Advisors, Arrowstreet Capital, and Two Sigma Advisors. In terms of the portfolio weights assigned to each position Jade Capital Advisors allocated the biggest weight to Venator Materials PLC (NYSE:VNTR), around 1.05% of its 13F portfolio. Cruiser Capital Advisors is also relatively very bullish on the stock, dishing out 0.23 percent of its 13F equity portfolio to VNTR.
With a general bullishness amongst the heavyweights, specific money managers were leading the bulls’ herd. Cruiser Capital Advisors, managed by Keith M. Rosenbloom, initiated the most outsized position in Venator Materials PLC (NYSE:VNTR). Cruiser Capital Advisors had $0.2 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also made a $0.1 million investment in the stock during the quarter. The only other fund with a brand new VNTR position is Paul Cantor, Joseph Weiss, and Will Wurm’s Beech Hill Partners.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Venator Materials PLC (NYSE:VNTR) but similarly valued. We will take a look at Caledonia Mining Corporation Plc (NYSE:CMCL), Lifetime Brands Inc (NASDAQ:LCUT), Gamida Cell Ltd. (NASDAQ:GMDA), Verastem Inc (NASDAQ:VSTM), Mastech Digital, Inc. (NYSE:MHH), Red Robin Gourmet Burgers, Inc. (NASDAQ:RRGB), and Organigram Holdings Inc. (NASDAQ:OGI). This group of stocks’ market caps are similar to VNTR’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 6.9 hedge funds with bullish positions and the average amount invested in these stocks was $13 million. That figure was $21 million in VNTR’s case. Verastem Inc (NASDAQ:VSTM) is the most popular stock in this table. On the other hand Caledonia Mining Corporation Plc (NYSE:CMCL) is the least popular one with only 4 bullish hedge fund positions. Venator Materials PLC (NYSE:VNTR) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for VNTR is 63.1. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. Hedge funds were also right about betting on VNTR as the stock returned 74.6% since the end of Q3 (through 12/8) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.