Hedge funds are known to underperform the bull markets but that’s not because they are bad at investing. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. Hedge funds underperform because they are hedged. The Standard and Poor’s 500 Index returned approximately 20% in the first 9 months of this year through September 30th (including dividend payments). Conversely, hedge funds’ top 20 large-cap stock picks generated a return of 24% during the same 9-month period. An average long/short hedge fund returned only a fraction of this due to the hedges they implement and the large fees they charge. Our research covering the last 18 years indicates that investors can outperform the market by imitating hedge funds’ consensus stock picks rather than directly investing in hedge funds. 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 Vocera Communications Inc (NYSE:VCRA).
Vocera Communications Inc (NYSE:VCRA) shareholders have witnessed a decrease in enthusiasm from smart money lately. Our calculations also showed that VCRA isn’t among the 30 most popular stocks among hedge funds (see the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the 21st century investor’s toolkit there are a lot of tools stock market investors employ to evaluate publicly traded companies. Some of the less known tools are hedge fund and insider trading sentiment. Our researchers have shown that, historically, those who follow the top picks of the elite investment managers can outperform the S&P 500 by a superb amount (see the details here).
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 view the fresh hedge fund action regarding Vocera Communications Inc (NYSE:VCRA).
Hedge fund activity in Vocera Communications Inc (NYSE:VCRA)
At the end of the second quarter, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, a change of -18% from the first quarter of 2019. Below, you can check out the change in hedge fund sentiment towards VCRA over the last 16 quarters. With hedge funds’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).
Among these funds, Sectoral Asset Management held the most valuable stake in Vocera Communications Inc (NYSE:VCRA), which was worth $12.2 million at the end of the second quarter. On the second spot was Renaissance Technologies which amassed $11 million worth of shares. Moreover, Lucha Capital Management, Endurant Capital Management, and Perceptive Advisors were also bullish on Vocera Communications Inc (NYSE:VCRA), allocating a large percentage of their portfolios to this stock.
Since Vocera Communications Inc (NYSE:VCRA) has experienced bearish sentiment from the aggregate hedge fund industry, it’s safe to say that there exists a select few hedge funds who were dropping their positions entirely by the end of the second quarter. Intriguingly, Noam Gottesman’s GLG Partners dumped the biggest investment of all the hedgies tracked by Insider Monkey, comprising close to $15.3 million in stock. Minhua Zhang’s fund, Weld Capital Management, also dropped its stock, about $1.5 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest was cut by 3 funds by the end of the second quarter.
Let’s now take a look at hedge fund activity in other stocks similar to Vocera Communications Inc (NYSE:VCRA). We will take a look at MeiraGTx Holdings plc (NASDAQ:MGTX), Vivint Solar Inc (NYSE:VSLR), Global Brass and Copper Holdings Inc (NYSE:BRSS), and Spectrum Pharmaceuticals, Inc. (NASDAQ:SPPI). This group of stocks’ market valuations resemble VCRA’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MGTX | 9 | 253019 | -2 |
| VSLR | 11 | 36996 | 0 |
| BRSS | 17 | 228771 | 1 |
| SPPI | 9 | 42962 | -4 |
| Average | 11.5 | 140437 | -1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.5 hedge funds with bullish positions and the average amount invested in these stocks was $140 million. That figure was $52 million in VCRA’s case. Global Brass and Copper Holdings Inc (NYSE:BRSS) is the most popular stock in this table. On the other hand MeiraGTx Holdings plc (NASDAQ:MGTX) is the least popular one with only 9 bullish hedge fund positions. Vocera Communications Inc (NYSE:VCRA) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but 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 VCRA wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on VCRA were disappointed as the stock returned -22.8% 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 this year.
Disclosure: None. This article was originally published at Insider Monkey.
