We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Victory Capital Holdings, Inc. (NASDAQ:VCTR).
Is Victory Capital Holdings, Inc. (NASDAQ:VCTR) a bargain? Investors who are in the know are selling. The number of bullish hedge fund bets retreated by 5 recently. Our calculations also showed that VCTR isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
At the moment there are a lot of formulas stock market investors employ to value their stock investments. A duo of the less utilized formulas are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best hedge fund managers can outpace the S&P 500 by a very impressive margin (see the details here).
Israel Englander of Millennium Management
We leave no stone unturned when looking for the next great investment idea. For example, COVID-19 pandemic is still the main driver of stock prices. So we are checking out this trader’s corona catalyst trades. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to take a glance at the fresh hedge fund action surrounding Victory Capital Holdings, Inc. (NASDAQ:VCTR).
How are hedge funds trading Victory Capital Holdings, Inc. (NASDAQ:VCTR)?
Heading into the first quarter of 2020, a total of 7 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -42% from the third quarter of 2019. Below, you can check out the change in hedge fund sentiment towards VCTR over the last 18 quarters. With hedge funds’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Steamboat Capital Partners, managed by Parsa Kiai, holds the most valuable position in Victory Capital Holdings, Inc. (NASDAQ:VCTR). Steamboat Capital Partners has a $25.5 million position in the stock, comprising 7.2% of its 13F portfolio. Coming in second is Ian Simm of Impax Asset Management, with a $22 million position; 0.2% of its 13F portfolio is allocated to the company. Remaining peers with similar optimism encompass Renaissance Technologies, David Rodriguez-Fraile’s BlueMar Capital Management and Israel Englander’s Millennium Management. In terms of the portfolio weights assigned to each position Steamboat Capital Partners allocated the biggest weight to Victory Capital Holdings, Inc. (NASDAQ:VCTR), around 7.21% of its 13F portfolio. BlueMar Capital Management is also relatively very bullish on the stock, dishing out 1.9 percent of its 13F equity portfolio to VCTR.
Due to the fact that Victory Capital Holdings, Inc. (NASDAQ:VCTR) has witnessed declining sentiment from the smart money, it’s easy to see that there is a sect of hedge funds who were dropping their entire stakes heading into Q4. Interestingly, Ravi Chopra’s Azora Capital cut the largest position of all the hedgies followed by Insider Monkey, valued at an estimated $5.6 million in stock. Gregg Moskowitz’s fund, Interval Partners, also dropped its stock, about $2.4 million worth. These moves are important to note, as aggregate hedge fund interest dropped by 5 funds heading into Q4.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Victory Capital Holdings, Inc. (NASDAQ:VCTR) but similarly valued. These stocks are Hudson Ltd. (NYSE:HUD), Universal Corp (NYSE:UVV), Herc Holdings Inc. (NYSE:HRI), and Madrigal Pharmaceuticals, Inc. (NASDAQ:MDGL). This group of stocks’ market valuations are closest to VCTR’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HUD | 10 | 38953 | -2 |
| UVV | 14 | 116152 | -2 |
| HRI | 21 | 572257 | -7 |
| MDGL | 19 | 328636 | 6 |
| Average | 16 | 264000 | -1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $264 million. That figure was $73 million in VCTR’s case. Herc Holdings Inc. (NYSE:HRI) is the most popular stock in this table. On the other hand Hudson Ltd. (NYSE:HUD) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Victory Capital Holdings, Inc. (NASDAQ:VCTR) is even less popular than HUD. Hedge funds dodged a bullet by taking a bearish stance towards VCTR. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 1.0% in 2020 through May 1st but managed to beat the market by 12.9 percentage points. Unfortunately VCTR wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); VCTR investors were disappointed as the stock returned -28.7% during the same time period 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 so far in 2020.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
