We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession.
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Keeping this in mind, let’s take a look at whether Verisign, Inc. (NASDAQ:VRSN) 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 Verisign, Inc. (NASDAQ:VRSN) a healthy stock for your portfolio? Hedge funds are turning bullish. The number of bullish hedge fund bets advanced by 6 recently. Our calculations also showed that VRSN isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
If you’d ask most investors, hedge funds are assumed to be underperforming, outdated financial vehicles of years past. While there are greater than 8000 funds trading at the moment, We look at the crème de la crème of this club, approximately 850 funds. These hedge fund managers manage the lion’s share of the smart money’s total asset base, and by monitoring their matchless stock picks, Insider Monkey has identified numerous investment strategies that have historically outrun Mr. Market. Insider Monkey’s flagship short hedge fund strategy outstripped the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 35.3% since February 2017 (through March 3rd) even though the market was up more than 35% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to take a look at the recent hedge fund action surrounding Verisign, Inc. (NASDAQ:VRSN).
Hedge fund activity in Verisign, Inc. (NASDAQ:VRSN)
Heading into the first quarter of 2020, a total of 38 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 19% from the previous quarter. The graph below displays the number of hedge funds with bullish position in VRSN over the last 18 quarters. So, let’s review 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, Warren Buffett’s Berkshire Hathaway has the most valuable position in Verisign, Inc. (NASDAQ:VRSN), worth close to $2.4957 billion, amounting to 1% of its total 13F portfolio. The second largest stake is held by Renaissance Technologies, founded by Jim Simons, which holds a $1.5936 billion position; 1.2% of its 13F portfolio is allocated to the stock. Some other peers with similar optimism comprise D. E. Shaw’s D E Shaw, William von Mueffling’s Cantillon Capital Management and Cliff Asness’s AQR Capital Management. In terms of the portfolio weights assigned to each position Stamina Capital Management allocated the biggest weight to Verisign, Inc. (NASDAQ:VRSN), around 7.69% of its 13F portfolio. Atalan Capital is also relatively very bullish on the stock, designating 5.54 percent of its 13F equity portfolio to VRSN.
Consequently, specific money managers were breaking ground themselves. Melvin Capital Management, managed by Gabriel Plotkin, created the most valuable position in Verisign, Inc. (NASDAQ:VRSN). Melvin Capital Management had $125.2 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also made a $34.8 million investment in the stock during the quarter. The other funds with new positions in the stock are Mikal Patel’s Oribel Capital Management, Christopher Weldon’s Stamina Capital Management, and Angela Aldrich’s Bayberry Capital Partners.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Verisign, Inc. (NASDAQ:VRSN) but similarly valued. These stocks are Liberty Broadband Corp (NASDAQ:LBRDA), Fox Corporation (NASDAQ:FOX), McCormick & Company, Incorporated (NYSE:MKC), and Northern Trust Corporation (NASDAQ:NTRS). This group of stocks’ market values match VRSN’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 27.5 hedge funds with bullish positions and the average amount invested in these stocks was $600 million. That figure was $5873 million in VRSN’s case. Northern Trust Corporation (NASDAQ:NTRS) is the most popular stock in this table. On the other hand Liberty Broadband Corp (NASDAQ:LBRDA) is the least popular one with only 24 bullish hedge fund positions. Compared to these stocks Verisign, Inc. (NASDAQ:VRSN) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 11.7% in 2020 through March 11th but still managed to beat the market by 3.1 percentage points. Hedge funds were also right about betting on VRSN as the stock returned -7.6% so far in Q1 (through March 11th) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.