Was The Smart Money Right About Verisign, Inc. (VRSN)?

Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren’t timid and registered double digit market beating gains. Financials, energy and industrial stocks initially suffered the most but many of these stocks delivered strong returns since November and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment towards Verisign, Inc. (NASDAQ:VRSN) changed recently.

Is Verisign, Inc. (NASDAQ:VRSN) a buy, sell, or hold? Money managers were betting on the stock. The number of long hedge fund positions advanced by 1 in recent months. Verisign, Inc. (NASDAQ:VRSN) was in 47 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 47. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that VRSN isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings). There were 46 hedge funds in our database with VRSN positions at the end of the third quarter.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 197% since March 2017 and outperformed the S&P 500 ETFs by more than 124 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

William Von Mueffling - Cantillon Capital Management

William Von Mueffling of Cantillon Capital Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best hydrogen fuel cell stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind let’s check out the new hedge fund action encompassing Verisign, Inc. (NASDAQ:VRSN).

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

At the end of December, a total of 47 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 2% from the previous quarter. By comparison, 38 hedge funds held shares or bullish call options in VRSN 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.

The largest stake in Verisign, Inc. (NASDAQ:VRSN) was held by Berkshire Hathaway, which reported holding $2773.3 million worth of stock at the end of December. It was followed by Renaissance Technologies with a $1238.1 million position. Other investors bullish on the company included D E Shaw, Stockbridge Partners, and Cantillon Capital Management. In terms of the portfolio weights assigned to each position Yost Capital Management allocated the biggest weight to Verisign, Inc. (NASDAQ:VRSN), around 15.5% of its 13F portfolio. Atalan Capital is also relatively very bullish on the stock, designating 11.81 percent of its 13F equity portfolio to VRSN.

As industrywide interest jumped, key hedge funds were leading the bulls’ herd. Two Creeks Capital Management, managed by Ryan Pedlow, initiated the most valuable position in Verisign, Inc. (NASDAQ:VRSN). Two Creeks Capital Management had $59.6 million invested in the company at the end of the quarter. Charles Pollnow’s Triple Frond Partners also made a $25.2 million investment in the stock during the quarter. The other funds with brand new VRSN positions are Rob Cope’s Columbus Point, Brandon Haley’s Holocene Advisors, and Thomas Rigo’s Bishop Rock Capital.

Let’s go over hedge fund activity in other stocks similar to Verisign, Inc. (NASDAQ:VRSN). These stocks are Keysight Technologies Inc (NYSE:KEYS), ArcelorMittal (NYSE:MT), Coupa Software Incorporated (NASDAQ:COUP), Yandex NV (NASDAQ:YNDX), Slack Technologies Inc (NYSE:WORK), Fresenius Medical Care AG & Co. KGaA (NYSE:FMS), and The Williams Companies, Inc. (NYSE:WMB). All of these stocks’ market caps are similar to VRSN’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
KEYS 27 592599 -9
MT 18 511254 -2
COUP 62 4125119 12
YNDX 34 1623779 1
WORK 66 3977861 46
FMS 9 15599 0
WMB 38 563371 0
Average 36.3 1629940 6.9

View table here if you experience formatting issues.

As you can see these stocks had an average of 36.3 hedge funds with bullish positions and the average amount invested in these stocks was $1630 million. That figure was $6422 million in VRSN’s case. Slack Technologies Inc (NYSE:WORK) is the most popular stock in this table. On the other hand Fresenius Medical Care AG & Co. KGaA  (NYSE:FMS) is the least popular one with only 9 bullish hedge fund positions. Verisign, Inc. (NASDAQ:VRSN) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for VRSN is 69.3. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 90.7% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 35 percentage points. These stocks gained 13.6% in 2021 through April 30th and beat the market again by 1.6 percentage points. Unfortunately VRSN wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on VRSN were disappointed as the stock returned 1.1% since the end of December (through 4/30) 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 many of these stocks already outperformed the market since 2019.

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