At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (see why hell is coming). We reversed our stance on March 25th after seeing unprecedented fiscal and monetary stimulus unleashed by the Fed and the Congress. This is the perfect market for stock pickers, now that the stocks are fully valued again. In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Veeva Systems Inc (NYSE:VEEV) at the end of the second quarter and determine whether the smart money was really smart about this stock.
Veeva Systems Inc (NYSE:VEEV) shareholders have witnessed an increase in hedge fund sentiment of late. Veeva Systems Inc (NYSE:VEEV) was in 35 hedge funds' portfolios at the end of June. The all time high for this statistics is 44. There were 33 hedge funds in our database with VEEV holdings at the end of March. Our calculations also showed that VEEV isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). Video: Watch our video about the top 5 most popular hedge fund stocks.
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 monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 56 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Donald Sussman of Paloma Partners
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, this “mom” trader turned $2000 into $2 million within 2 years. So, we are checking out her best trade idea of the month. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Now let's view the recent hedge fund action regarding Veeva Systems Inc (NYSE:VEEV).
What does smart money think about Veeva Systems Inc (NYSE:VEEV)?
At second quarter's end, a total of 35 of the hedge funds tracked by Insider Monkey were long this stock, a change of 6% from one quarter earlier. On the other hand, there were a total of 35 hedge funds with a bullish position in VEEV a year ago. With hedge funds' sentiment swirling, there exists a select group of notable hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).
Among these funds, Arrowstreet Capital held the most valuable stake in Veeva Systems Inc (NYSE:VEEV), which was worth $131.4 million at the end of the third quarter. On the second spot was PEAK6 Capital Management which amassed $115.7 million worth of shares. Citadel Investment Group, Citadel Investment Group, and Zevenbergen Capital Investments 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 Navellier & Associates allocated the biggest weight to Veeva Systems Inc (NYSE:VEEV), around 4.04% of its 13F portfolio. Aubrey Capital Management is also relatively very bullish on the stock, designating 1.77 percent of its 13F equity portfolio to VEEV.
As aggregate interest increased, key hedge funds have jumped into Veeva Systems Inc (NYSE:VEEV) headfirst. Citadel Investment Group, managed by Ken Griffin, created the biggest position in Veeva Systems Inc (NYSE:VEEV). Citadel Investment Group had $62.2 million invested in the company at the end of the quarter. Dmitry Balyasny's Balyasny Asset Management also made a $32.3 million investment in the stock during the quarter. The following funds were also among the new VEEV investors: Andrew Dalrymple and Barry McCorkell's Aubrey Capital Management, Qing Li's Sciencast Management, and Donald Sussman's Paloma Partners.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Veeva Systems Inc (NYSE:VEEV) but similarly valued. These stocks are Eaton Corporation plc (NYSE:ETN), Las Vegas Sands Corp. (NYSE:LVS), Canadian Pacific Railway Limited (NYSE:CP), Eni SpA (NYSE:E), Kinder Morgan Inc (NYSE:KMI), Sempra Energy (NYSE:SRE), and Snap Inc. (NYSE:SNAP). All of these stocks' market caps are closest to VEEV's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ETN,34,560308,-1 LVS,47,2396746,5 CP,36,1635509,4 E,8,43125,3 KMI,50,1090828,3 SRE,35,635290,8 SNAP,49,1601957,1 Average,37,1137680,3.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 37 hedge funds with bullish positions and the average amount invested in these stocks was $1138 million. That figure was $530 million in VEEV's case. Kinder Morgan Inc (NYSE:KMI) is the most popular stock in this table. On the other hand Eni SpA (NYSE:E) is the least popular one with only 8 bullish hedge fund positions. Veeva Systems Inc (NYSE:VEEV) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for VEEV is 63. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 33% in 2020 through the end of August and still beat the market by 23.2 percentage points. A small number of hedge funds were also right about betting on VEEV as the stock returned 20.4% since the end of June and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.