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

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. Now, we are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article you are going to find out whether hedge funds thoughtVera Bradley, Inc. (NASDAQ:VRA) was a good investment heading into the second quarter and how the stock traded in comparison to the top hedge fund picks.

Hedge fund interest in Vera Bradley, Inc. (NASDAQ:VRA) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare VRA to other stocks including Gold Standard Ventures Corp (NYSE:GSV), Kandi Technolgies Group Inc. (NASDAQ:KNDI), and MMA Capital Holdings Inc. (NASDAQ:MMAC) to get a better sense of its popularity.

Video: 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 a select group of hedge fund holdings outperformed the S&P 500 ETFs by 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.

Donald Sussman Paloma Partners

Donald Sussman of Paloma Partners

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Cannabis stocks are roaring back in 2020, so we are checking out this under-the-radar stock. We go through lists like the 10 most profitable companies in America 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. With all of this in mind let’s take a glance at the fresh hedge fund action encompassing Vera Bradley, Inc. (NASDAQ:VRA).

What does smart money think about Vera Bradley, Inc. (NASDAQ:VRA)?

At the end of the first quarter, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. By comparison, 18 hedge funds held shares or bullish call options 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.

The largest stake in Vera Bradley, Inc. (NASDAQ:VRA) was held by Renaissance Technologies, which reported holding $4.2 million worth of stock at the end of September. It was followed by Woodson Capital Management with a $2.1 million position. Other investors bullish on the company included Royce & Associates, Arrowstreet Capital, and AQR Capital Management. In terms of the portfolio weights assigned to each position Woodson Capital Management allocated the biggest weight to Vera Bradley, Inc. (NASDAQ:VRA), around 0.29% of its 13F portfolio. Zebra Capital Management is also relatively very bullish on the stock, earmarking 0.08 percent of its 13F equity portfolio to VRA.

Since Vera Bradley, Inc. (NASDAQ:VRA) has experienced declining sentiment from the aggregate hedge fund industry, it’s safe to say that there were a few fund managers that elected to cut their positions entirely heading into Q4. It’s worth mentioning that Jack Ripsteen’s Potrero Capital Research dumped the biggest position of all the hedgies tracked by Insider Monkey, valued at close to $1.2 million in stock. Michael Gelband’s fund, ExodusPoint Capital, also said goodbye to its stock, about $0.4 million worth. These moves are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Vera Bradley, Inc. (NASDAQ:VRA) but similarly valued. We will take a look at Gold Standard Ventures Corp (NYSE:GSV), Kandi Technolgies Group Inc. (NASDAQ:KNDI), MMA Capital Holdings Inc. (NASDAQ:MMAC), and SM Energy Company (NYSE:SM). This group of stocks’ market values are similar to VRA’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
GSV 4 3886 1
KNDI 1 102 -2
MMAC 3 3297 0
SM 17 19963 -5
Average 6.25 6812 -1.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 6.25 hedge funds with bullish positions and the average amount invested in these stocks was $7 million. That figure was $15 million in VRA’s case. SM Energy Company (NYSE:SM) is the most popular stock in this table. On the other hand Kandi Technolgies Group Inc. (NASDAQ:KNDI) 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 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 VRA wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on VRA were disappointed as the stock returned 1.7% 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.