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Should You Avoid VEON Ltd. (VEON)?

We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. That’s a big deal.This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.

VEON Ltd. (NASDAQ:VEON) has experienced a decrease in hedge fund sentiment recently. VEON was in 11 hedge funds’ portfolios at the end of the third quarter of 2019. There were 12 hedge funds in our database with VEON positions at the end of the previous quarter. Our calculations also showed that VEON isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Howard Marks OAKTREE CAPITAL MANAGEMENT

Howard Marks of Oaktree Capital Management

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. We’re going to analyze the key hedge fund action encompassing VEON Ltd. (NASDAQ:VEON).

How are hedge funds trading VEON Ltd. (NASDAQ:VEON)?

At the end of the third quarter, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -8% from the previous quarter. On the other hand, there were a total of 7 hedge funds with a bullish position in VEON a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Driehaus Capital held the most valuable stake in VEON Ltd. (NASDAQ:VEON), which was worth $14.2 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $7 million worth of shares. Maverick Capital, Oaktree Capital Management, and Two Sigma Advisors 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 Driehaus Capital allocated the biggest weight to VEON Ltd. (NASDAQ:VEON), around 0.46% of its 13F portfolio. Oaktree Capital Management is also relatively very bullish on the stock, earmarking 0.08 percent of its 13F equity portfolio to VEON.

Judging by the fact that VEON Ltd. (NASDAQ:VEON) has experienced falling interest from the entirety of the hedge funds we track, logic holds that there were a few hedgies that slashed their entire stakes in the third quarter. It’s worth mentioning that Paul Marshall and Ian Wace’s Marshall Wace sold off the biggest position of the “upper crust” of funds followed by Insider Monkey, comprising an estimated $0.3 million in stock, and Michael Gelband’s ExodusPoint Capital was right behind this move, as the fund said goodbye to about $0.1 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest fell by 1 funds in the third quarter.

Let’s now take a look at hedge fund activity in other stocks similar to VEON Ltd. (NASDAQ:VEON). We will take a look at Janus Henderson Group plc (NYSE:JHG), Affiliated Managers Group, Inc. (NYSE:AMG), Amedisys Inc (NASDAQ:AMED), and Ryman Hospitality Properties, Inc. (NYSE:RHP). This group of stocks’ market caps match VEON’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
JHG 14 183137 -1
AMG 20 446109 0
AMED 21 197534 -3
RHP 20 397632 -1
Average 18.75 306103 -1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 18.75 hedge funds with bullish positions and the average amount invested in these stocks was $306 million. That figure was $44 million in VEON’s case. Amedisys Inc (NASDAQ:AMED) is the most popular stock in this table. On the other hand Janus Henderson Group plc (NYSE:JHG) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks VEON Ltd. (NASDAQ:VEON) is even less popular than JHG. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on VEON, though not to the same extent, as the stock returned 10% during the fourth quarter (through 11/30) and outperformed the market as well.

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

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