Should You Buy VMware, Inc. (VMW)?

The government requires hedge funds and wealthy investors with over a certain portfolio size to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on September 30. We at Insider Monkey have made an extensive database of more than 700 of those elite funds and prominent investors’ filings. In this article, we analyze how these elite funds and prominent investors traded VMware, Inc. (NYSE:VMW) based on those filings.

VMware, Inc. (NYSE:VMW) shareholders have witnessed an increase in support from the world’s most elite money managers lately. Our calculations also showed that VMW isn’t among the 30 most popular stocks among hedge funds.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (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 24% through December 3, 2018. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.


We’re going to check out the new hedge fund action surrounding VMware, Inc. (NYSE:VMW).

What does the smart money think about VMware, Inc. (NYSE:VMW)?

At the end of the third quarter, a total of 38 of the hedge funds tracked by Insider Monkey were long this stock, a change of 3% from the second quarter of 2018. Below, you can check out the change in hedge fund sentiment towards VMW over the last 13 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with VMW Positions

According to Insider Monkey’s hedge fund database, Jim Simons’s Renaissance Technologies has the number one position in VMware, Inc. (NYSE:VMW), worth close to $801.6 million, accounting for 0.8% of its total 13F portfolio. Coming in second is D. E. Shaw of D E Shaw, with a $320.4 million position; 0.4% of its 13F portfolio is allocated to the stock. Some other professional money managers with similar optimism contain Josh Resnick’s Jericho Capital Asset Management, John Overdeck and David Siegel’s Two Sigma Advisors and Cliff Asness’s AQR Capital Management.

As aggregate interest increased, key money managers were breaking ground themselves. Mason Capital Management, managed by Kenneth Mario Garschina, established the biggest call position in VMware, Inc. (NYSE:VMW). Mason Capital Management had $156.1 million invested in the company at the end of the quarter. Matthew Mark’s Jet Capital Investors also made a $33 million investment in the stock during the quarter. The following funds were also among the new VMW investors: Guy Shahar’s DSAM Partners, Philippe Laffont’s Coatue Management, and Andrew Sandler’s Sandler Capital Management.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as VMware, Inc. (NYSE:VMW) but similarly valued. We will take a look at CSX Corporation (NYSE:CSX), FedEx Corporation (NYSE:FDX), Activision Blizzard, Inc. (NASDAQ:ATVI), and The PNC Financial Services Group, Inc. (NYSE:PNC). This group of stocks’ market valuations match VMW’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CSX 54 6677253 2
FDX 42 3460281 -1
ATVI 74 5781502 8
PNC 40 3063707 0
Average 52.5 4745686 2.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 52.5 hedge funds with bullish positions and the average amount invested in these stocks was $4.77 billion. That figure was $2.37 billion in VMW’s case. Activision Blizzard, Inc. (NASDAQ:ATVI) is the most popular stock in this table. On the other hand PNC Financial Services Group Inc. (NYSE:PNC) is the least popular one with only 40 bullish hedge fund positions. Compared to these stocks VMware, Inc. (NYSE:VMW) is even less popular than PNC. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.

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