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Were Hedge Funds Right About Pulling The Plug On VEON Ltd. (VEON)?

We are still in an overall bull market and many stocks that smart money investors were piling into surged through October 17th. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 45% and 39% respectively. Hedge funds’ top 3 stock picks returned 34.4% this year and beat the S&P 500 ETFs by 13 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like VEON Ltd. (NASDAQ:VEON).

VEON Ltd. (NASDAQ:VEON) shareholders have witnessed a decrease in enthusiasm from smart money in recent months. VEON was in 12 hedge funds’ portfolios at the end of the second quarter of 2019. There were 15 hedge funds in our database with VEON holdings at the end of the previous quarter. Our calculations also showed that VEON isn’t among the 30 most popular stocks among hedge funds (see the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (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 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Howard Marks OAKTREE CAPITAL MANAGEMENT

Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s take a gander at the latest hedge fund action surrounding VEON Ltd. (NASDAQ:VEON).

How are hedge funds trading VEON Ltd. (NASDAQ:VEON)?

Heading into the third quarter of 2019, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -20% from the first quarter of 2019. On the other hand, there were a total of 10 hedge funds with a bullish position in VEON a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

VEON_oct2019

Among these funds, Driehaus Capital held the most valuable stake in VEON Ltd. (NASDAQ:VEON), which was worth $30.5 million at the end of the second quarter. On the second spot was Renaissance Technologies which amassed $13.3 million worth of shares. Moreover, Arrowstreet Capital, Millennium Management, and Oaktree Capital Management were also bullish on VEON Ltd. (NASDAQ:VEON), allocating a large percentage of their portfolios to this stock.

Because VEON Ltd. (NASDAQ:VEON) has faced bearish sentiment from the smart money, we can see that there exists a select few hedgies who sold off their full holdings last quarter. Interestingly, John W. Moon’s Moon Capital dumped the biggest position of all the hedgies monitored by Insider Monkey, worth an estimated $12.9 million in stock, and Simon Sadler’s Segantii Capital was right behind this move, as the fund sold off about $10.5 million worth. These moves are important to note, as aggregate hedge fund interest dropped by 3 funds last quarter.

Let’s go over hedge fund activity in other stocks similar to VEON Ltd. (NASDAQ:VEON). We will take a look at Blueprint Medicines Corporation (NASDAQ:BPMC), 51job, Inc. (NASDAQ:JOBS), Chegg Inc (NYSE:CHGG), and Moderna, Inc. (NASDAQ:MRNA). This group of stocks’ market valuations are closest to VEON’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BPMC 27 663156 -5
JOBS 9 22105 -3
CHGG 26 431870 -10
MRNA 18 251106 3
Average 20 342059 -3.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $342 million. That figure was $72 million in VEON’s case. Blueprint Medicines Corporation (NASDAQ:BPMC) is the most popular stock in this table. On the other hand 51job, Inc. (NASDAQ:JOBS) is the least popular one with only 9 bullish hedge fund positions. VEON Ltd. (NASDAQ:VEON) 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately VEON wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); VEON investors were disappointed as the stock returned -14.3% during the third 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 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far in 2019.

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

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