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Hedge Funds Are Dumping Verizon Communications Inc. (VZ)

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  • VZ

In this article we are going to use hedge fund sentiment as a tool and determine whether Verizon Communications Inc. (NYSE:VZ) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds' picks don't beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.

Verizon Communications Inc. (NYSE:VZ) was in 57 hedge funds' portfolios at the end of the third quarter of 2021. The all time high for this statistic is 69. VZ has experienced a decrease in hedge fund sentiment in recent months. There were 63 hedge funds in our database with VZ positions at the end of the second quarter. Our calculations also showed that VZ isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV 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. With all of this in mind let's take a look at the latest hedge fund action encompassing Verizon Communications Inc. (NYSE:VZ).

Ryan Tolkin, CIO of Schonfeld Strategic Advisors

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

At Q3's end, a total of 57 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -10% from one quarter earlier. By comparison, 65 hedge funds held shares or bullish call options in VZ a year ago. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Berkshire Hathaway was the largest shareholder of Verizon Communications Inc. (NYSE:VZ), with a stake worth $8578.1 million reported as of the end of September. Trailing Berkshire Hathaway was Citadel Investment Group, which amassed a stake valued at $292.9 million. Skye Global Management, AQR Capital Management, and D E Shaw 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 Heathbridge Capital Management allocated the biggest weight to Verizon Communications Inc. (NYSE:VZ), around 8.69% of its 13F portfolio. Skye Global Management is also relatively very bullish on the stock, designating 4.74 percent of its 13F equity portfolio to VZ.

Because Verizon Communications Inc. (NYSE:VZ) has experienced a decline in interest from the entirety of the hedge funds we track, we can see that there was a specific group of hedge funds that decided to sell off their entire stakes in the third quarter. At the top of the heap, Matthew Stadelman's Diamond Hill Capital sold off the biggest position of all the hedgies tracked by Insider Monkey, valued at an estimated $241.5 million in stock. Bernard Horn's fund, Polaris Capital Management, also dumped its stock, about $33.1 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest fell by 6 funds in the third quarter.

Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Verizon Communications Inc. (NYSE:VZ) but similarly valued. These stocks are Eli Lilly and Company (NYSE:LLY), Novo Nordisk A/S (NYSE:NVO), Danaher Corporation (NYSE:DHR), Intel Corporation (NASDAQ:INTC), Abbott Laboratories (NYSE:ABT), PepsiCo, Inc. (NASDAQ:PEP), and Accenture Plc (NYSE:ACN). This group of stocks' market values are similar to VZ's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LLY,62,4287033,-2 NVO,27,4053265,7 DHR,74,6946837,-4 INTC,66,6472854,-12 ABT,63,3611527,2 PEP,61,4435441,-5 ACN,56,4460650,4 Average,58.4,4895372,-1.4 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 58.4 hedge funds with bullish positions and the average amount invested in these stocks was $4895 million. That figure was $10359 million in VZ's case. Danaher Corporation (NYSE:DHR) is the most popular stock in this table. On the other hand Novo Nordisk A/S (NYSE:NVO) is the least popular one with only 27 bullish hedge fund positions. Verizon Communications Inc. (NYSE:VZ) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for VZ is 55.7. 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. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. 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 gained 28.6% in 2021 through November 30th and surpassed the market again by 5.6 percentage points. Unfortunately VZ wasn't nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); VZ investors were disappointed as the stock returned -5.8% since the end of September (through 11/30) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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