Were Hedge Funds Right About Vera Bradley, Inc. (VRA)?

At Insider Monkey, we pore over the filings of nearly 866 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of March 31st. In this article, we will use that wealth of knowledge to determine whether or not Vera Bradley, Inc. (NASDAQ:VRA) makes for a good investment right now.

Is Vera Bradley, Inc. (NASDAQ:VRA) a bargain? Investors who are in the know were in an optimistic mood. The number of bullish hedge fund bets advanced by 2 in recent months. Vera Bradley, Inc. (NASDAQ:VRA) was in 17 hedge funds’ portfolios at the end of March. The all time high for this statistic is 23. Our calculations also showed that VRA isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

Roger Ibbotson of Zebra Capital Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 15 best Jim Cramer stocks to identify the next Tesla that will deliver outsized returns. 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 we’re going to check out the fresh hedge fund action surrounding Vera Bradley, Inc. (NASDAQ:VRA).

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

At first quarter’s end, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 13% from one quarter earlier. On the other hand, there were a total of 18 hedge funds with a bullish position in VRA a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to Insider Monkey’s hedge fund database, Richard Mashaal’s Rima Senvest Management has the largest position in Vera Bradley, Inc. (NASDAQ:VRA), worth close to $21.7 million, amounting to 0.7% of its total 13F portfolio. The second largest stake is held by Peter Schliemann of Rutabaga Capital Management, with a $6.5 million position; 3% of its 13F portfolio is allocated to the stock. Other hedge funds and institutional investors that hold long positions consist of Chuck Royce’s Royce & Associates, Renaissance Technologies and D. E. Shaw’s D E Shaw. In terms of the portfolio weights assigned to each position Rutabaga Capital Management allocated the biggest weight to Vera Bradley, Inc. (NASDAQ:VRA), around 3% of its 13F portfolio. Rima Senvest Management is also relatively very bullish on the stock, setting aside 0.68 percent of its 13F equity portfolio to VRA.

As one would reasonably expect, key money managers have been driving this bullishness. AQR Capital Management, managed by Cliff Asness, initiated the largest position in Vera Bradley, Inc. (NASDAQ:VRA). AQR Capital Management had $0.6 million invested in the company at the end of the quarter. Peter Muller’s PDT Partners also made a $0.4 million investment in the stock during the quarter. The following funds were also among the new VRA investors: Roger Ibbotson’s Zebra Capital Management, Ken Griffin’s Citadel Investment Group, and Greg Eisner’s Engineers Gate Manager.

Let’s check out hedge fund activity in other stocks similar to Vera Bradley, Inc. (NASDAQ:VRA). We will take a look at Leju Holdings Ltd (NYSE:LEJU), Immunic, Inc. (NASDAQ:IMUX), Fluidigm Corporation (NASDAQ:FLDM), CASI Pharmaceuticals Inc (NASDAQ:CASI), America First Multifamily Investors, L.P. (NASDAQ:ATAX), Metalla Royalty & Streaming Ltd. (NYSE:MTA), and CONSOL Energy Inc. (NYSE:CEIX). All of these stocks’ market caps resemble VRA’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
LEJU 2 3704 0
IMUX 9 26439 0
FLDM 15 79749 -6
CASI 10 35326 2
ATAX 1 102 -1
MTA 5 1516 3
CEIX 15 44158 0
Average 8.1 27285 -0.3

View table here if you experience formatting issues.

As you can see these stocks had an average of 8.1 hedge funds with bullish positions and the average amount invested in these stocks was $27 million. That figure was $51 million in VRA’s case. Fluidigm Corporation (NASDAQ:FLDM) is the most popular stock in this table. On the other hand America First Multifamily Investors, L.P. (NASDAQ:ATAX) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Vera Bradley, Inc. (NASDAQ:VRA) is more popular among hedge funds. Our overall hedge fund sentiment score for VRA is 79.2. 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. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.5% in 2021 through July 23rd and still beat the market by 10.1 percentage points. Unfortunately VRA wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on VRA were disappointed as the stock returned 7.8% since the end of the first quarter (through 7/23) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.

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