At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Vuzix Corporation (NASDAQ:VUZI).
Is Vuzix (VUZI) a good stock to buy now? Investors who are in the know were getting more bullish. The number of long hedge fund bets rose by 3 recently. Vuzix Corporation (NASDAQ:VUZI) was in 6 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 6. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that VUZI 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). There were 3 hedge funds in our database with VUZI holdings at the end of June.
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. Now let’s take a glance at the key hedge fund action surrounding Vuzix Corporation (NASDAQ:VUZI).
What have hedge funds been doing with Vuzix Corporation (NASDAQ:VUZI)?
Heading into the fourth quarter of 2020, a total of 6 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 100% from the previous quarter. By comparison, 3 hedge funds held shares or bullish call options in VUZI a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Ken Griffin’s Citadel Investment Group has the number one call position in Vuzix Corporation (NASDAQ:VUZI), worth close to $0.5 million, accounting for less than 0.1%% of its total 13F portfolio. Coming in second is LMR Partners, managed by Ben Levine, Andrew Manuel and Stefan Renold, which holds a $0.3 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Other hedge funds and institutional investors that hold long positions comprise D. E. Shaw’s D E Shaw, Israel Englander’s Millennium Management and Peter Algert’s Algert Global. In terms of the portfolio weights assigned to each position Algert Global allocated the biggest weight to Vuzix Corporation (NASDAQ:VUZI), around 0.06% of its 13F portfolio. LMR Partners is also relatively very bullish on the stock, earmarking 0.01 percent of its 13F equity portfolio to VUZI.
As aggregate interest increased, specific money managers were breaking ground themselves. Millennium Management, managed by Israel Englander, created the largest position in Vuzix Corporation (NASDAQ:VUZI). Millennium Management had $0.2 million invested in the company at the end of the quarter. Peter Algert’s Algert Global also initiated a $0.2 million position during the quarter. The only other fund with a new position in the stock is John Overdeck and David Siegel’s Two Sigma Advisors.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Vuzix Corporation (NASDAQ:VUZI) but similarly valued. We will take a look at Mereo BioPharma Group plc (NASDAQ:MREO), Axovant Gene Therapies Ltd. (NASDAQ:AXGT), BRT Apartments Corp (NYSE:BRT), Spirit of Texas Bancshares, Inc. (NASDAQ:STXB), Flotek Industries Inc (NYSE:FTK), Territorial Bancorp Inc (NASDAQ:TBNK), and Net 1 UEPS Technologies Inc (NASDAQ:UEPS). This group of stocks’ market valuations match VUZI’s market valuation.
|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 9.4 hedge funds with bullish positions and the average amount invested in these stocks was $24 million. That figure was $1 million in VUZI’s case. Axovant Gene Therapies Ltd. (NASDAQ:AXGT) is the most popular stock in this table. On the other hand Territorial Bancorp Inc (NASDAQ:TBNK) is the least popular one with only 4 bullish hedge fund positions. Vuzix Corporation (NASDAQ:VUZI) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for VUZI is 49.1. 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. This is a slightly negative signal and 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 30.7% in 2020 through November 27th and surpassed the market again by 16.1 percentage points. Unfortunately VUZI wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); VUZI investors were disappointed as the stock returned -9.2% since the end of September (through 11/27) 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 most of these stocks already outperformed the market in 2020.
Disclosure: None. This article was originally published at Insider Monkey.