Is Verisign, Inc. (NASDAQ:VRSN) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.
Is VRSN a good stock to buy now? Verisign, Inc. (NASDAQ:VRSN) was in 46 hedge funds’ portfolios at the end of September. The all time high for this statistic is 47. VRSN has seen a decrease in activity from the world’s largest hedge funds of late. There were 47 hedge funds in our database with VRSN holdings at the end of June. Our calculations also showed that VRSN 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.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this cannabis tech stock right now. We go through lists like the 15 best blue chip stocks to buy 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. Now we’re going to take a look at the new hedge fund action surrounding Verisign, Inc. (NASDAQ:VRSN).
Do Hedge Funds Think VRSN Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 46 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -2% from the second quarter of 2020. On the other hand, there were a total of 32 hedge funds with a bullish position in VRSN a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Berkshire Hathaway was the largest shareholder of Verisign, Inc. (NASDAQ:VRSN), with a stake worth $2625.3 million reported as of the end of September. Trailing Berkshire Hathaway was Renaissance Technologies, which amassed a stake valued at $1346.5 million. D E Shaw, Cantillon Capital Management, and Stockbridge Partners 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 Yost Capital Management allocated the biggest weight to Verisign, Inc. (NASDAQ:VRSN), around 11.09% of its 13F portfolio. Atalan Capital is also relatively very bullish on the stock, earmarking 10.82 percent of its 13F equity portfolio to VRSN.
Judging by the fact that Verisign, Inc. (NASDAQ:VRSN) has witnessed bearish sentiment from the entirety of the hedge funds we track, it’s safe to say that there were a few funds who were dropping their entire stakes heading into Q4. At the top of the heap, Andrew Immerman and Jeremy Schiffman’s Palestra Capital Management dumped the largest investment of the “upper crust” of funds watched by Insider Monkey, valued at an estimated $163.9 million in stock. Gabriel Plotkin’s fund, Melvin Capital Management, also dumped its stock, about $77.6 million worth. These moves are intriguing to say the least, as total hedge fund interest dropped by 1 funds heading into Q4.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Verisign, Inc. (NASDAQ:VRSN) but similarly valued. We will take a look at ZTO Express (Cayman) Inc. (NYSE:ZTO), Sirius XM Holdings Inc (NASDAQ:SIRI), Church & Dwight Co., Inc. (NYSE:CHD), Mettler-Toledo International Inc. (NYSE:MTD), Zillow Group Inc (NASDAQ:Z), Lloyds Banking Group PLC (NYSE:LYG), and XP Inc. (NASDAQ:XP). All of these stocks’ market caps resemble VRSN’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 31.3 hedge funds with bullish positions and the average amount invested in these stocks was $938 million. That figure was $6088 million in VRSN’s case. Zillow Group Inc (NASDAQ:Z) is the most popular stock in this table. On the other hand Lloyds Banking Group PLC (NYSE:LYG) is the least popular one with only 5 bullish hedge fund positions. Verisign, Inc. (NASDAQ:VRSN) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for VRSN is 65.4. 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 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 beat the market again by 16.2 percentage points. Unfortunately VRSN wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on VRSN were disappointed as the stock returned 1% since the end of September (through 12/8) 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.