Vereit Inc (VER) Fell Out Of Favor With Hedge Funds

At Insider Monkey, we pore over the filings of nearly 873 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of June 30th. In this article, we will use that wealth of knowledge to determine whether or not Vereit Inc (NYSE:VER) makes for a good investment right now.

Is Vereit Inc (NYSE:VER) an attractive investment right now? The smart money was turning less bullish. The number of long hedge fund bets shrunk by 5 recently. Vereit Inc (NYSE:VER) was in 22 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 44. Our calculations also showed that VER isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 27 hedge funds in our database with VER positions at the end of the first quarter.

To most shareholders, hedge funds are assumed to be slow, outdated financial vehicles of the past. While there are greater than 8000 funds trading at present, Our experts choose to focus on the top tier of this group, about 850 funds. It is estimated that this group of investors orchestrate bulk of the smart money’s total asset base, and by shadowing their matchless equity investments, Insider Monkey has revealed several investment strategies that have historically outperformed the broader indices. Insider Monkey’s flagship short hedge fund strategy outstripped the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Also, our monthly newsletter’s portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website.

Alex Litowitz Magnetar Capital

Alex Litowitz of Magnetar Capital

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

At Q2’s end, a total of 22 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -19% from one quarter earlier. By comparison, 23 hedge funds held shares or bullish call options in VER 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.

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Alec Litowitz and Ross Laser’s Magnetar Capital has the largest position in Vereit Inc (NYSE:VER), worth close to $130.4 million, amounting to 1.2% of its total 13F portfolio. The second most bullish fund manager is Glendon Capital Management, led by Matthew Barrett, holding a $121 million position; 7.8% of its 13F portfolio is allocated to the company. Some other hedge funds and institutional investors that hold long positions include George Soros’s Soros Fund Management, Matthew Halbower’s Pentwater Capital Management and Israel Englander’s Millennium Management. In terms of the portfolio weights assigned to each position Glendon Capital Management allocated the biggest weight to Vereit Inc (NYSE:VER), around 7.83% of its 13F portfolio. Water Island Capital is also relatively very bullish on the stock, designating 3 percent of its 13F equity portfolio to VER.

Seeing as Vereit Inc (NYSE:VER) has experienced a decline in interest from the smart money, logic holds that there were a few fund managers who sold off their entire stakes heading into Q3. At the top of the heap, Eduardo Abush’s Waterfront Capital Partners dumped the largest stake of the 750 funds monitored by Insider Monkey, worth close to $32.5 million in stock. Jonathan Litt’s fund, Land & Buildings Investment Management, also dumped its stock, about $14.8 million worth. These moves are interesting, as aggregate hedge fund interest fell by 5 funds heading into Q3.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Vereit Inc (NYSE:VER) but similarly valued. We will take a look at Bausch Health Companies Inc.  (NYSE:BHC), Universal Display Corporation (NASDAQ:OLED), Lithia Motors Inc (NYSE:LAD), Henry Schein, Inc. (NASDAQ:HSIC), GFL Environmental Inc. (NYSE:GFL), Paylocity Holding Corp (NASDAQ:PCTY), and Ares Management Corp (NYSE:ARES). This group of stocks’ market caps resemble VER’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BHC 45 3996536 3
OLED 23 105427 6
LAD 63 2924134 23
HSIC 39 1387222 7
GFL 23 670524 1
PCTY 19 507279 -3
ARES 20 686208 4
Average 33.1 1468190 5.9

View table here if you experience formatting issues.

As you can see these stocks had an average of 33.1 hedge funds with bullish positions and the average amount invested in these stocks was $1468 million. That figure was $798 million in VER’s case. Lithia Motors Inc (NYSE:LAD) is the most popular stock in this table. On the other hand Paylocity Holding Corp (NASDAQ:PCTY) is the least popular one with only 19 bullish hedge fund positions. Vereit Inc (NYSE:VER) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for VER is 18.4. 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. 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 24% in 2021 through October 22nd and still beat the market by 1.6 percentage points. A small number of hedge funds were also right about betting on VER as the stock returned 11% since the end of the second quarter (through 10/22) and outperformed the market by an even larger margin.

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