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Should You Avoid Visteon Corp (VC)?

In this article you are going to find out whether hedge funds think Visteon Corp (NASDAQ:VC) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Is Visteon Corp (NASDAQ:VC) a sound stock to buy now? Prominent investors are taking a bearish view. The number of long hedge fund positions decreased by 10 recently. Our calculations also showed that VC isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). VC was in 19 hedge funds’ portfolios at the end of March. There were 29 hedge funds in our database with VC positions at the end of the previous quarter.

Video: Watch our video about the top 5 most popular hedge fund stocks.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 58 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Harold Levy Iridian Asset Management

Harold Levy of Iridian Asset 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. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s check out the key hedge fund action encompassing Visteon Corp (NASDAQ:VC).

How have hedgies been trading Visteon Corp (NASDAQ:VC)?

At the end of the first quarter, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -34% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards VC over the last 18 quarters. With hedge funds’ capital changing hands, there exists a select group of key hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, David Cohen and Harold Levy’s Iridian Asset Management has the biggest position in Visteon Corp (NASDAQ:VC), worth close to $48.1 million, amounting to 1.2% of its total 13F portfolio. The second largest stake is held by Trigran Investments, managed by Douglas T. Granat, which holds a $25.4 million position; 5.6% of its 13F portfolio is allocated to the stock. Remaining members of the smart money that hold long positions comprise Ken Griffin’s Citadel Investment Group, Douglas T. Granat’s Trigran Investments and Gregg J. Powers’s Private Capital Management. In terms of the portfolio weights assigned to each position Trigran Investments allocated the biggest weight to Visteon Corp (NASDAQ:VC), around 5.58% of its 13F portfolio. Private Capital Management is also relatively very bullish on the stock, designating 3.37 percent of its 13F equity portfolio to VC.

Since Visteon Corp (NASDAQ:VC) has experienced a decline in interest from the aggregate hedge fund industry, we can see that there exists a select few hedge funds who sold off their full holdings last quarter. It’s worth mentioning that Richard Driehaus’s Driehaus Capital sold off the largest stake of all the hedgies tracked by Insider Monkey, valued at an estimated $5.3 million in stock. Jack Woodruff’s fund, Candlestick Capital Management, also dropped its stock, about $4.3 million worth. These transactions are important to note, as total hedge fund interest dropped by 10 funds last quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Visteon Corp (NASDAQ:VC) but similarly valued. These stocks are Korn Ferry (NYSE:KFY), ProAssurance Corporation (NYSE:PRA), Silicon Motion Technology Corp. (NASDAQ:SIMO), and Comfort Systems USA, Inc. (NYSE:FIX). This group of stocks’ market valuations are closest to VC’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
KFY 20 136009 1
PRA 10 124328 -8
SIMO 18 214067 1
FIX 20 71526 -4
Average 17 136483 -2.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $136 million. That figure was $152 million in VC’s case. Korn Ferry (NYSE:KFY) is the most popular stock in this table. On the other hand ProAssurance Corporation (NYSE:PRA) is the least popular one with only 10 bullish hedge fund positions. Visteon Corp (NASDAQ:VC) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.4% in 2020 through June 22nd but still beat the market by 15.9 percentage points. Hedge funds were also right about betting on VC as the stock returned 53.9% in Q2 (through June 22nd) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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