Were Hedge Funds Right About Vertiv (VRT)?

Is Vertiv Holdings Co (NYSE:VRT) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.

Is Vertiv Holdings Co (NYSE:VRT) a cheap investment now? The smart money was getting less bullish. The number of long hedge fund positions fell by 1 recently. Vertiv Holdings Co (NYSE:VRT) was in 50 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 51. Our calculations also showed that VRT isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings). There were 51 hedge funds in our database with VRT holdings at the end of September.

If you’d ask most market participants, hedge funds are assumed to be underperforming, outdated financial vehicles of years past. While there are more than 8000 funds trading at present, Our experts choose to focus on the elite of this group, around 850 funds. These hedge fund managers handle most of the smart money’s total asset base, and by keeping track of their first-class equity investments, Insider Monkey has determined a few investment strategies that have historically outperformed the market. Insider Monkey’s flagship short hedge fund strategy exceeded the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Also, our monthly newsletter’s portfolio of long stock picks returned 197% since March 2017 (through March 2021) and beat the S&P 500 Index by 124 percentage points. You can download a sample issue of this newsletter on our website .


Louis Bacon Moore of Moore Capital

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 take a gander at the fresh hedge fund action surrounding Vertiv Holdings Co (NYSE:VRT).

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

Heading into the first quarter of 2021, a total of 50 of the hedge funds tracked by Insider Monkey were long this stock, a change of -2% from the third quarter of 2020. By comparison, 35 hedge funds held shares or bullish call options in VRT a year ago. With the smart money’s capital changing hands, there exists a select group of key hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).

More specifically, Alyeska Investment Group was the largest shareholder of Vertiv Holdings Co (NYSE:VRT), with a stake worth $138.8 million reported as of the end of December. Trailing Alyeska Investment Group was Brahman Capital, which amassed a stake valued at $138.5 million. Citadel Investment Group, Eminence Capital, and Senator Investment Group were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position SAYA Management allocated the biggest weight to Vertiv Holdings Co (NYSE:VRT), around 13.87% of its 13F portfolio. Brahman Capital is also relatively very bullish on the stock, earmarking 12.1 percent of its 13F equity portfolio to VRT.

Judging by the fact that Vertiv Holdings Co (NYSE:VRT) has witnessed declining sentiment from hedge fund managers, it’s easy to see that there is a sect of hedge funds that decided to sell off their positions entirely by the end of the fourth quarter. Interestingly, Bart Baum’s Ionic Capital Management dropped the biggest position of all the hedgies watched by Insider Monkey, totaling close to $24.3 million in stock, and Robert Henry Lynch’s Aristeia Capital was right behind this move, as the fund said goodbye to about $11.3 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest fell by 1 funds by the end of the fourth quarter.

Let’s now review hedge fund activity in other stocks similar to Vertiv Holdings Co (NYSE:VRT). These stocks are Credit Acceptance Corp. (NASDAQ:CACC), Perrigo Co Plc (NYSE:PRGO), TopBuild Corp (NYSE:BLD), Mattel, Inc. (NASDAQ:MAT), Devon Energy Corporation (NYSE:DVN), Western Alliance Bancorporation (NYSE:WAL), and Targa Resources Corp (NYSE:TRGP). All of these stocks’ market caps resemble VRT’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CACC 29 771364 0
PRGO 31 363463 2
BLD 19 42185 -2
MAT 25 858930 -1
DVN 45 709230 1
WAL 22 112754 -6
TRGP 29 488973 -1
Average 28.6 478128 -1

View table here if you experience formatting issues.

As you can see these stocks had an average of 28.6 hedge funds with bullish positions and the average amount invested in these stocks was $478 million. That figure was $1345 million in VRT’s case. Devon Energy Corporation (NYSE:DVN) is the most popular stock in this table. On the other hand TopBuild Corp (NYSE:BLD) is the least popular one with only 19 bullish hedge fund positions. Compared to these stocks Vertiv Holdings Co (NYSE:VRT) is more popular among hedge funds. Our overall hedge fund sentiment score for VRT is 83.4. 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 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 returned 13.6% in 2021 through April 30th but still managed to beat the market by 1.6 percentage points. Hedge funds were also right about betting on VRT as the stock returned 21.6% since the end of December (through 4/30) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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