Is VRM Stock A Buy or Sell?

In this article we will analyze whether Vroom, Inc. (NASDAQ:VRM) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market by double digits annually.

Is VRM stock a buy? Vroom, Inc. (NASDAQ:VRM) was in 25 hedge funds’ portfolios at the end of December. The all time high for this statistic is 34. VRM investors should pay attention to a decrease in hedge fund interest lately. There were 34 hedge funds in our database with VRM positions at the end of the third quarter. Our calculations also showed that VRM isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the CBD market is growing at a 33% annualized rate, so we are taking a closer look at this under-the-radar hemp stock. We go through lists like the 10 best biotech stocks under $10 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. Now let’s check out the recent hedge fund action surrounding Vroom, Inc. (NASDAQ:VRM).

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

At fourth quarter’s end, a total of 25 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -26% from the previous quarter. The graph below displays the number of hedge funds with bullish position in VRM over the last 22 quarters. With the smart money’s capital changing hands, there exists a few key hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).

Among these funds, Foxhaven Asset Management held the most valuable stake in Vroom, Inc. (NASDAQ:VRM), which was worth $93.1 million at the end of the fourth quarter. On the second spot was Miller Value Partners which amassed $85.6 million worth of shares. Point72 Asset Management, Chilton Investment Company, and Citadel Investment Group were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Yarra Square Partners allocated the biggest weight to Vroom, Inc. (NASDAQ:VRM), around 3.69% of its 13F portfolio. Miller Value Partners is also relatively very bullish on the stock, earmarking 2.6 percent of its 13F equity portfolio to VRM.

Because Vroom, Inc. (NASDAQ:VRM) has experienced a decline in interest from hedge fund managers, it’s safe to say that there lies a certain “tier” of hedgies who were dropping their entire stakes by the end of the fourth quarter. Interestingly, Brad Gerstner’s Altimeter Capital Management sold off the largest position of all the hedgies monitored by Insider Monkey, comprising an estimated $39.2 million in stock. Alexander Mitchell’s fund, Scopus Asset Management, also dropped its stock, about $28.5 million worth. These bearish behaviors are important to note, as total hedge fund interest fell by 9 funds by the end of the fourth quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Vroom, Inc. (NASDAQ:VRM) but similarly valued. These stocks are NOV Inc. (NYSE:NOV), KT Corporation (NYSE:KT), Cameco Corporation (NYSE:CCJ), WillScot Mobile Mini Holdings Corp. (NASDAQ:WSC), MDU Resources Group Inc (NYSE:MDU), Ingredion Incorporated (NYSE:INGR), and Marathon Oil Corporation (NYSE:MRO). All of these stocks’ market caps resemble VRM’s market cap.

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As you can see these stocks had an average of 24.3 hedge funds with bullish positions and the average amount invested in these stocks was $463 million. That figure was $362 million in VRM’s case. WillScot Mobile Mini Holdings Corp. (NASDAQ:WSC) is the most popular stock in this table. On the other hand KT Corporation (NYSE:KT) is the least popular one with only 11 bullish hedge fund positions. Vroom, Inc. (NASDAQ:VRM) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for VRM is 47.2. 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. 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 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 12.3% in 2021 through April 19th and beat the market again by 0.9 percentage points. Unfortunately VRM wasn’t nearly as popular as these 30 stocks and hedge funds that were betting on VRM were disappointed as the stock returned 2.1% since the end of December (through 4/19) 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 many of these stocks already outperformed the market since 2019.

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