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VEON Ltd. (VEON): Are Hedge Funds Right About This Stock?

In this article we will check out the progression of hedge fund sentiment towards VEON Ltd. (NASDAQ:VEON) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.

VEON Ltd. (NASDAQ:VEON) has experienced a decrease in enthusiasm from smart money in recent months. Our calculations also showed that VEON 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).

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

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 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 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

Howard Marks OAKTREE CAPITAL MANAGEMENT

Howard Marks of Oaktree Capital Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, We take a look at lists like the 10 most profitable companies in the world to identify the compounders that are likely to deliver double digit returns. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to take a peek at the new hedge fund action regarding VEON Ltd. (NASDAQ:VEON).

What does smart money think about VEON Ltd. (NASDAQ:VEON)?

At the end of the first quarter, a total of 8 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -27% from the previous quarter. On the other hand, there were a total of 15 hedge funds with a bullish position in VEON a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in VEON Ltd. (NASDAQ:VEON) was held by Arrowstreet Capital, which reported holding $6.7 million worth of stock at the end of September. It was followed by Two Sigma Advisors with a $5.8 million position. Other investors bullish on the company included Oaktree Capital Management, Maverick Capital, and GAMCO Investors. In terms of the portfolio weights assigned to each position Oaktree Capital Management allocated the biggest weight to VEON Ltd. (NASDAQ:VEON), around 0.08% of its 13F portfolio. Maverick Capital is also relatively very bullish on the stock, designating 0.03 percent of its 13F equity portfolio to VEON.

Since VEON Ltd. (NASDAQ:VEON) has experienced bearish sentiment from the entirety of the hedge funds we track, it’s safe to say that there was a specific group of fund managers that decided to sell off their full holdings by the end of the first quarter. Intriguingly, Renaissance Technologies cut the biggest position of all the hedgies monitored by Insider Monkey, comprising close to $4.5 million in stock. Paul Marshall and Ian Wace’s fund, Marshall Wace LLP, also sold off its stock, about $2.4 million worth. These transactions are important to note, as total hedge fund interest was cut by 3 funds by the end of the first quarter.

Let’s also examine hedge fund activity in other stocks similar to VEON Ltd. (NASDAQ:VEON). We will take a look at ANGI Homeservices Inc (NASDAQ:ANGI), Marathon Oil Corporation (NYSE:MRO), World Wrestling Entertainment, Inc. (NYSE:WWE), and Yamana Gold Inc. (NYSE:AUY). This group of stocks’ market valuations are closest to VEON’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ANGI 27 231718 4
MRO 24 93423 -6
WWE 31 374902 1
AUY 14 212094 -2
Average 24 228034 -0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 24 hedge funds with bullish positions and the average amount invested in these stocks was $228 million. That figure was $19 million in VEON’s case. World Wrestling Entertainment, Inc. (NYSE:WWE) is the most popular stock in this table. On the other hand Yamana Gold Inc. (NYSE:AUY) 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 AUY. Hedge funds dodged a bullet by taking a bearish stance towards VEON. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.2% in 2020 through June 17th but managed to beat the market by 14.8 percentage points. Unfortunately VEON wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); VEON investors were disappointed as the stock returned 17.2% during the second quarter (through June 17th) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in 2020.

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