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Verizon Communications Inc. (VZ) Swallows AOL: Do Hedge Funds Like Verizon?

Verizon Communications Inc. (NYSE:VZ) has completed its acquisition of AOL, Inc. (NYSE:AOL) in just 42 days after it had announced its tender offer of $50 per share for the technology company. CEO Tim Armstrong will still oversee operations of AOL while reporting to Marni Walden, EVP and president of product innovation and new businesses at Verizon. As Verizon reallocates resources as part of the acquisition of AOL, it has sold its CyberTrust SSL certificates business for an undisclosed amount to DigiCert. Year-to-date, Verizon Communications Inc. (NYSE:VZ)’s shares have increased in price by a marginal 0.76%. During the past year, the stock has gone down by 3.23%.

Reflecting this laggardly performance is the fact that among the hedge funds tracked by Insider Monkey, Verizon Communications Inc. (NYSE:VZ) has seen a decrease in support from the world’s most elite money managers in recent months.

AOL, Verizon

We follow hedge funds because our research has shown that their stock picks historically managed to generate alpha even though the filings are up to 45-days delayed. We used a 60-day delay in our back tests to be on the safe side and our research showed that the 15 most popular small-cap stocks among hedge funds outperformed the S&P 500 Total Return Index by an average of 95 basis points per month between 1999 and 2012. After adjusting for risk, our calculations revealed that these stocks’ monthly alpha was 80 basis points. We have also been sharing and tracking the performance of these stocks since the end of August 2012, during which time they have returned 144%, outperforming the S&P 500 ETF by nearly 85 percentage points (see more details here).

Furthermore, we also follow insider activity in companies like Verizon to gauge whether those who are more familiar with the activity of these firms are confident in these companies. In the case of Verizon, there have been no purchases of shares during the first half of 2015 and insiders sold small amounts of stock during the same period.

Keeping this in mind, let’s take a look at the fresh action surrounding Verizon Communications Inc. (NYSE:VZ).

Hedge fund activity in Verizon Communications Inc. (NYSE:VZ)

Heading into the second quarter, a total of 59 of the hedge funds tracked by Insider Monkey held long positions in this stock, a decline of 6% from the previous quarter. The aggregate value of their holdings also decreased to about $2.21 billion from about $2.96 billion. This is a major decrease since the stock went up 6.09% during the first quarter of the year.

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