At Insider Monkey, we pore over the filings of nearly 873 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we've gathered as a result gives us access to a wealth of collective knowledge based on these firms' portfolio holdings as of June 30th. In this article, we will use that wealth of knowledge to determine whether or not Verint Systems Inc. (NASDAQ:VRNT) makes for a good investment right now.
Verint Systems Inc. (NASDAQ:VRNT) investors should be aware of an increase in hedge fund sentiment of late. Verint Systems Inc. (NASDAQ:VRNT) was in 30 hedge funds' portfolios at the end of June. The all time high for this statistic is 36. Our calculations also showed that VRNT isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).
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' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 79 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Robert G. Moses of RGM Capital
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Do Hedge Funds Think VRNT Is A Good Stock To Buy Now?
At the end of the second quarter, a total of 30 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 15% from the first quarter of 2020. The graph below displays the number of hedge funds with bullish position in VRNT over the last 24 quarters. With hedgies' capital changing hands, there exists an "upper tier" of notable hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
More specifically, Baupost Group was the largest shareholder of Verint Systems Inc. (NASDAQ:VRNT), with a stake worth $137 million reported as of the end of June. Trailing Baupost Group was RGM Capital, which amassed a stake valued at $114.5 million. Cardinal Capital, Fisher Asset Management, and Rima Senvest Management 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 RGM Capital allocated the biggest weight to Verint Systems Inc. (NASDAQ:VRNT), around 5.3% of its 13F portfolio. Ophir Asset Management is also relatively very bullish on the stock, dishing out 4.04 percent of its 13F equity portfolio to VRNT.
Now, key money managers were breaking ground themselves. Sphera Global Healthcare Fund, managed by Doron Breen and Mori Arkin, established the most valuable position in Verint Systems Inc. (NASDAQ:VRNT). Sphera Global Healthcare Fund had $6.8 million invested in the company at the end of the quarter. Ryan Tolkin (CIO)'s Schonfeld Strategic Advisors also made a $1.5 million investment in the stock during the quarter. The following funds were also among the new VRNT investors: Noam Gottesman's GLG Partners, Matthew Hulsizer's PEAK6 Capital Management, and Paul Tudor Jones's Tudor Investment Corp.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Verint Systems Inc. (NASDAQ:VRNT) but similarly valued. These stocks are NanoString Technologies Inc (NASDAQ:NSTG), Viper Energy Partners LP (NASDAQ:VNOM), Old National Bancorp (NASDAQ:ONB), Brady Corp (NYSE:BRC), South Jersey Industries Inc (NYSE:SJI), Axonics, Inc. (NASDAQ:AXNX), and BancorpSouth Bank (NYSE:BXS). All of these stocks' market caps are closest to VRNT's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NSTG,25,773889,0 VNOM,12,93531,2 ONB,15,47746,-2 BRC,15,134881,-1 SJI,14,190188,-18 AXNX,22,319335,6 BXS,18,112595,6 Average,17.3,238881,-1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.3 hedge funds with bullish positions and the average amount invested in these stocks was $239 million. That figure was $630 million in VRNT's case. NanoString Technologies Inc (NASDAQ:NSTG) is the most popular stock in this table. On the other hand Viper Energy Partners LP (NASDAQ:VNOM) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Verint Systems Inc. (NASDAQ:VRNT) is more popular among hedge funds. Our overall hedge fund sentiment score for VRNT is 84. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks returned 24.9% in 2021 through October 15th but still managed to beat the market by 4.5 percentage points. Hedge funds were also right about betting on VRNT as the stock returned 3.2% since the end of June (through 10/15) 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.