Out of thousands of stocks that are currently traded on the market, it is difficult to determine those that can really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of over 700 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Veritex Holdings Inc (NASDAQ:VBTX).
Is Veritex Holdings Inc (NASDAQ:VBTX) a safe investment right now? The smart money is buying. The number of long hedge fund positions moved up by 5 lately. Our calculations also showed that VBTX isn't among the 30 most popular stocks among hedge funds. VBTX was in 17 hedge funds' portfolios at the end of September. There were 12 hedge funds in our database with VBTX positions at the end of the previous quarter.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (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 24% through December 3, 2018. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We're going to take a gander at the latest hedge fund action surrounding Veritex Holdings Inc (NASDAQ:VBTX).
How are hedge funds trading Veritex Holdings Inc (NASDAQ:VBTX)?
At Q3's end, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 42% from the second quarter of 2018. The graph below displays the number of hedge funds with bullish position in VBTX over the last 13 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Mendon Capital Advisors held the most valuable stake in Veritex Holdings Inc (NASDAQ:VBTX), which was worth $21.1 million at the end of the third quarter. On the second spot was Forest Hill Capital which amassed $15.7 million worth of shares. Moreover, Millennium Management, Elizabeth Park Capital Management, and Marshall Wace LLP were also bullish on Veritex Holdings Inc (NASDAQ:VBTX), allocating a large percentage of their portfolios to this stock.
As one would reasonably expect, specific money managers have jumped into Veritex Holdings Inc (NASDAQ:VBTX) headfirst. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, assembled the most valuable position in Veritex Holdings Inc (NASDAQ:VBTX). Marshall Wace LLP had $7.7 million invested in the company at the end of the quarter. Ravi Chopra's Azora Capital also initiated a $4.4 million position during the quarter. The following funds were also among the new VBTX investors: Paul Hondros's AlphaOne Capital Partners, Chuck Royce's Royce & Associates, and Andrew Feldstein and Stephen Siderow's Blue Mountain Capital.
Let's now review hedge fund activity in other stocks similar to Veritex Holdings Inc (NASDAQ:VBTX). These stocks are Primo Water Corporation (NASDAQ:PRMW), Quantenna Communications, Inc. (NASDAQ:QTNA), Templeton Dragon Fund, Inc. (NYSE:TDF), and Gamco Investors Inc. (NYSE:GBL). This group of stocks' market valuations are closest to VBTX's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PRMW,16,176434,-1 QTNA,16,58592,-1 TDF,1,242,-3 GBL,9,11152,0 Average,10.5,61605,-1.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.5 hedge funds with bullish positions and the average amount invested in these stocks was $62 million. That figure was $92 million in VBTX's case. Primo Water Corporation (NASDAQ:PRMW) is the most popular stock in this table. On the other hand Templeton Dragon Fund, Inc. (NYSE:TDF) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Veritex Holdings Inc (NASDAQ:VBTX) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
Disclosure: None. This article was originally published at Insider Monkey.