Is Vonage Holdings (VG) A Smart Long-Term Buy?

Adestella Investment Management, a long/short equity investment management firm, published its fourth quarter 2020 investor letter – a copy of which can be downloaded here. A return of 24.8% was recorded by the fund in the fourth quarter of 2020 and 93.3% for the whole year, outperforming its S&P 500 benchmark that delivered a 12.1% and 18.4% returns respectively in the same period. You can view the fund’s top 5 holdings to have a peek at their top bets for 2021.

Adestella Investment Management, in their Q4 2020 investor letter, mentioned Vonage Holdings Corp. (NASDAQ: VG) and emphasized their views on the company. Vonage Holdings Corp. is a New Jersey-based cloud communications solutions provider that currently has a $3 billion market capitalization. Since the beginning of the year, VG delivered a -4.39% return, but its 12-month gains are up by 110.79%. As of March 11, 2021, the stock closed at $12.31 per share.

Here is what Adestella Investment Management has to say about Vonage Holdings Corp. in their Q4 2020 investor letter:

“Vonage (VG) – the VG thesis has largely played out as expected. The market has gradually shifted its focus from the declining consumer operations to the growing business ones, highlighted by the API unit. As its legacy home phone VOIP solutions continue to become a smaller and smaller portion of the overall pie, we think this trend will continue. If the API unit can continue to grow at 25-30%, that segment alone covers most of the enterprise value at just a ~6x sales multiple before giving any credit to the sizable UCaaS operations. The API unit’s closest comparable, Twilio (TWLO), currently trades at 31x sales, so it’s not unreasonable to think there’s upside to our estimate here. Shares have returned around 80% since our writeup (and slightly higher from our cost as we added in the weeks that followed), but we’ve maintained most of our position as the key growth drivers remain intact.”

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Our calculations show that Vonage Holdings Corp. (NASDAQ: VG) does not belong in our list of the 30 Most Popular Stocks Among Hedge Funds. As of the end of the fourth quarter of 2020, Vonage Holdings Corp. was in 37 hedge fund portfolios, compared to 36 funds in the third quarter. VG delivered a -17.44% return in the past 3 months.

The top 10 stocks among hedge funds returned 231.2% between 2015 and 2020, and outperformed the S&P 500 Index ETFs by more than 126 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds’ poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of dumb S&P 500 ETFs. Here you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.

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