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VMware, Inc. (VMW): Are Hedge Funds Right About This Stock?

Out of thousands of stocks that are currently traded on the market, it is difficult to determine those that can really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of over 700 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about VMware, Inc. (NYSE:VMW).

VMware, Inc. (NYSE:VMW) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 35 hedge funds’ portfolios at the end of the third quarter of 2015. At the end of this article we will also compare VMW to other stocks including Raytheon Company (NYSE:RTN), Twenty-First Century Fox Inc (NASDAQ:FOXA), and Northrop Grumman Corporation (NYSE:NOC) to get a better sense of its popularity.

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With all of this in mind, we’re going to take a gander at the fresh action regarding VMware, Inc. (NYSE:VMW).

How are hedge funds trading VMware, Inc. (NYSE:VMW)?

When looking at the institutional investors followed by Insider Monkey, Matt Sirovich and Jeremy Mindich’s Scopia Capital has the most valuable position in VMware, Inc. (NYSE:VMW), worth close to $144.2 million, amounting to 3.1% of its total 13F portfolio. Sitting at the No. 2 spot is Ken Griffin of Citadel Investment Group, with an $103.6 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors with similar optimism include John Overdeck and David Siegel’s Two Sigma Advisors, Paul Marshall and Ian Wace’s Marshall Wace LLP and Paul Singer’s Elliott Management.

At the top of the heap, Christopher James’s Partner Fund Management cut the largest position of all the hedgies monitored by Insider Monkey, valued at an estimated $72.2 million in stock. Jacob Gottlieb’s fund, Visium Asset Management, also dropped its stock, about $14.3 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s also examine hedge fund activity in other stocks similar to VMware, Inc. (NYSE:VMW). These stocks are Raytheon Company (NYSE:RTN), Twenty-First Century Fox Inc (NASDAQ:FOXA), Northrop Grumman Corporation (NYSE:NOC), and T MOBILE US INC (NYSE:TMUS). All of these stocks’ market caps match VMW’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
RTN 31 839028 -6
FOXA 56 4044012 -1
NOC 37 1985310 5
TMUS 54 3199501 -15

As you can see these stocks had an average of 44.5 hedge funds with bullish positions and the average amount invested in these stocks was $2517 million. That figure was $960 million in VMW’s case. Twenty-First Century Fox Inc (NASDAQ:FOXA) is the most popular stock in this table. On the other hand Raytheon Company (NYSE:RTN) is the least popular one with only 31 bullish hedge fund positions. VMware, Inc. (NYSE:VMW) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard FOXA might be a better candidate to consider a long position.

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