Hedge funds run by legendary names like Nelson Peltz and David Tepper make billions of dollars a year for themselves and their super-rich accredited investors (you’ve got to have a minimum of $1 million liquid to invest in a hedge fund) by spending enormous resources on analyzing and uncovering data about small-cap stocks that the big brokerage houses don’t follow. Small caps are where they can generate significant outperformance. That's why we pay special attention to hedge fund activity in these stocks.
Is 21Vianet Group Inc (NASDAQ:VNET) going to take off soon? Hedge funds are betting on the stock. The number of bullish hedge fund positions went up by 2 lately. Our calculations also showed that VNET isn't among the 30 most popular stocks among hedge funds.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 6.3% year to date (through December 3rd) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 18 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
We're going to review the new hedge fund action encompassing 21Vianet Group Inc (NASDAQ:VNET).
What have hedge funds been doing with 21Vianet Group Inc (NASDAQ:VNET)?
Heading into the fourth quarter of 2018, a total of 13 of the hedge funds tracked by Insider Monkey were long this stock, a change of 18% from one quarter earlier. On the other hand, there were a total of 7 hedge funds with a bullish position in VNET at the beginning of this year. With hedgies' positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in 21Vianet Group Inc (NASDAQ:VNET), which was worth $9.6 million at the end of the third quarter. On the second spot was Dalton Investments which amassed $5.4 million worth of shares. Moreover, Sylebra Capital Management, D E Shaw, and Millennium Management were also bullish on 21Vianet Group Inc (NASDAQ:VNET), allocating a large percentage of their portfolios to this stock.
Consequently, key hedge funds were leading the bulls' herd. Sylebra Capital Management, managed by Daniel Patrick Gibson, created the biggest position in 21Vianet Group Inc (NASDAQ:VNET). Sylebra Capital Management had $3 million invested in the company at the end of the quarter. Ernest Chow and Jonathan Howe's Sensato Capital Management also made a $1.3 million investment in the stock during the quarter. The other funds with new positions in the stock are Warren Lammert's Granite Point Capital and Matthew Hulsizer's PEAK6 Capital Management.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as 21Vianet Group Inc (NASDAQ:VNET) but similarly valued. These stocks are Alder Biopharmaceuticals Inc (NASDAQ:ALDR), The Buckle, Inc. (NYSE:BKE), Chase Corporation (NYSEAMEX:CCF), and CTS Corporation (NYSE:CTS). This group of stocks' market values are closest to VNET's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ALDR,16,359698,-3 BKE,15,29553,3 CCF,6,90698,1 CTS,10,112420,1 Average,11.75,148092,0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.75 hedge funds with bullish positions and the average amount invested in these stocks was $148 million. That figure was $27 million in VNET's case. Alder Biopharmaceuticals Inc (NASDAQ:ALDR) is the most popular stock in this table. On the other hand Chase Corporation (NYSEAMEX:CCF) is the least popular one with only 6 bullish hedge fund positions. 21Vianet Group Inc (NASDAQ:VNET) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. In this regard ALDR might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.