Varonis Systems Inc (VRNS): Are Hedge Funds Right About This Stock?

Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don’t make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards Varonis Systems Inc (NASDAQ:VRNS) to find out whether there were any major changes in hedge funds’ views.

Varonis Systems Inc (NASDAQ:VRNS) investors should be aware of an increase in hedge fund sentiment of late. Varonis Systems Inc (NASDAQ:VRNS) was in 27 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 32. Our calculations also showed that VRNS isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Keeping this in mind let’s take a gander at the fresh hedge fund action regarding Varonis Systems Inc (NASDAQ:VRNS).

John Levin of Levin Capital

John Levin of Levin Capital Strategies

Do Hedge Funds Think VRNS Is A Good Stock To Buy Now?

At Q3’s end, a total of 27 of the hedge funds tracked by Insider Monkey were long this stock, a change of 13% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards VRNS over the last 25 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Matrix Capital Management held the most valuable stake in Varonis Systems Inc (NASDAQ:VRNS), which was worth $75.9 million at the end of the third quarter. On the second spot was Tremblant Capital which amassed $75 million worth of shares. Driehaus Capital, Renaissance Technologies, 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 Mondrian Capital allocated the biggest weight to Varonis Systems Inc (NASDAQ:VRNS), around 5.94% of its 13F portfolio. Andar Capital is also relatively very bullish on the stock, setting aside 5.78 percent of its 13F equity portfolio to VRNS.

As one would reasonably expect, specific money managers were leading the bulls’ herd. Driehaus Capital, managed by Richard Driehaus, assembled the biggest position in Varonis Systems Inc (NASDAQ:VRNS). Driehaus Capital had $23.5 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also initiated a $9.3 million position during the quarter. The other funds with brand new VRNS positions are Paul Marshall and Ian Wace’s Marshall Wace LLP, Matthew Hulsizer’s PEAK6 Capital Management, and John A. Levin’s Levin Capital Strategies.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Varonis Systems Inc (NASDAQ:VRNS) but similarly valued. These stocks are First Financial Bankshares Inc (NASDAQ:FFIN), Healthcare Trust Of America Inc (NYSE:HTA), Mattel, Inc. (NASDAQ:MAT), TaskUs Inc. (NASDAQ:TASK), Omnicell, Inc. (NASDAQ:OMCL), ChargePoint Holdings, Inc. (NYSE:CHPT), and Bumble Inc. (NASDAQ:BMBL). This group of stocks’ market values match VRNS’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
FFIN 20 81284 12
HTA 14 381781 -9
MAT 34 1030578 9
TASK 18 230676 -2
OMCL 20 110091 2
CHPT 18 97964 1
BMBL 35 608650 12
Average 22.7 363003 3.6

View table here if you experience formatting issues.

As you can see these stocks had an average of 22.7 hedge funds with bullish positions and the average amount invested in these stocks was $363 million. That figure was $298 million in VRNS’s case. Bumble Inc. (NASDAQ:BMBL) is the most popular stock in this table. On the other hand Healthcare Trust Of America Inc (NYSE:HTA) is the least popular one with only 14 bullish hedge fund positions. Varonis Systems Inc (NASDAQ:VRNS) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for VRNS is 64.3. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 31.1% in 2021 through December 9th and beat the market again by 5.1 percentage points. Unfortunately VRNS wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on VRNS were disappointed as the stock returned -16.6% since the end of September (through 12/9) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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