Were Hedge Funds Right About Ditching ViaSat, Inc. (VSAT)?

We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards ViaSat, Inc. (NASDAQ:VSAT) and determine whether hedge funds skillfully traded this stock.

ViaSat, Inc. (NASDAQ:VSAT) investors should be aware of a decrease in support from the world’s most elite money managers of late. Our calculations also showed that VSAT isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Crispin Odey of Odey Asset Management Group

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so we are checking out this under-the-radar lithium stock. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Now let’s take a gander at the fresh hedge fund action surrounding ViaSat, Inc. (NASDAQ:VSAT).

What have hedge funds been doing with ViaSat, Inc. (NASDAQ:VSAT)?

At the end of the first quarter, a total of 21 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -19% from the previous quarter. By comparison, 22 hedge funds held shares or bullish call options in VSAT a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

When looking at the institutional investors followed by Insider Monkey, Seth Klarman’s Baupost Group has the largest position in ViaSat, Inc. (NASDAQ:VSAT), worth close to $493.3 million, accounting for 7.3% of its total 13F portfolio. Coming in second is Bob Peck and Andy Raab of FPR Partners, with a $228.7 million position; the fund has 9.4% of its 13F portfolio invested in the stock. Remaining professional money managers with similar optimism include Mason Hawkins’s Southeastern Asset Management, Crispin Odey’s Odey Asset Management Group and Jeffrey Bronchick’s Cove Street Capital. In terms of the portfolio weights assigned to each position Odey Asset Management Group allocated the biggest weight to ViaSat, Inc. (NASDAQ:VSAT), around 10.99% of its 13F portfolio. FPR Partners is also relatively very bullish on the stock, dishing out 9.4 percent of its 13F equity portfolio to VSAT.

Due to the fact that ViaSat, Inc. (NASDAQ:VSAT) has faced a decline in interest from the entirety of the hedge funds we track, it’s safe to say that there exists a select few hedgies that decided to sell off their positions entirely heading into Q4. It’s worth mentioning that Matthew Tewksbury’s Stevens Capital Management cut the largest investment of all the hedgies tracked by Insider Monkey, comprising close to $0.7 million in stock, and Noam Gottesman’s GLG Partners was right behind this move, as the fund said goodbye to about $0.5 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest fell by 5 funds heading into Q4.

Let’s now take a look at hedge fund activity in other stocks similar to ViaSat, Inc. (NASDAQ:VSAT). We will take a look at Old National Bancorp (NASDAQ:ONB), HMS Holdings Corp. (NASDAQ:HMSY), LiveRamp Holdings, Inc. (NYSE:RAMP), and Piedmont Office Realty Trust, Inc. (NYSE:PDM). All of these stocks’ market caps resemble VSAT’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ONB 15 20462 1
HMSY 20 78205 -5
RAMP 16 136678 -4
PDM 7 73993 -4
Average 14.5 77335 -3

View table here if you experience formatting issues.

As you can see these stocks had an average of 14.5 hedge funds with bullish positions and the average amount invested in these stocks was $77 million. That figure was $948 million in VSAT’s case. HMS Holdings Corp. (NASDAQ:HMSY) is the most popular stock in this table. On the other hand Piedmont Office Realty Trust, Inc. (NYSE:PDM) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks ViaSat, Inc. (NASDAQ:VSAT) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 18.6% in 2020 through July 27th and still beat the market by 17.1 percentage points. Unfortunately VSAT wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on VSAT were disappointed as the stock returned 4.3% since the end of the first quarter 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 most of these stocks already outperformed the market in 2020.

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