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With the first-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the second quarter of 2021. One of these stocks was Vertiv Holdings Co (NYSE:VRT).
Is Vertiv Holdings Co (NYSE:VRT) a bargain? Hedge funds were getting less bullish. The number of long hedge fund bets fell by 11 in recent months. Vertiv Holdings Co (NYSE:VRT) was in 39 hedge funds' portfolios at the end of March. The all time high for this statistic is 51. Our calculations also showed that VRT isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.
Peter Rathjens of Arrowstreet Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best battery 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With all of this in mind we're going to review the latest hedge fund action encompassing Vertiv Holdings Co (NYSE:VRT).
Do Hedge Funds Think VRT Is A Good Stock To Buy Now?
Heading into the second quarter of 2021, a total of 39 of the hedge funds tracked by Insider Monkey were long this stock, a change of -22% from the fourth quarter of 2020. On the other hand, there were a total of 39 hedge funds with a bullish position in VRT a year ago. With the smart money's sentiment swirling, there exists a select group of notable hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Brahman Capital, managed by Mitch Kuflik and Rob Sobel, holds the number one position in Vertiv Holdings Co (NYSE:VRT). Brahman Capital has a $142 million position in the stock, comprising 12% of its 13F portfolio. The second most bullish fund manager is Senator Investment Group, managed by Doug Silverman and Alexander Klabin, which holds a $91.9 million position; the fund has 1.9% of its 13F portfolio invested in the stock. Remaining peers with similar optimism encompass Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital, Anand Parekh's Alyeska Investment Group and Rob Citrone's Discovery Capital Management. In terms of the portfolio weights assigned to each position SAYA Management allocated the biggest weight to Vertiv Holdings Co (NYSE:VRT), around 14.78% of its 13F portfolio. Brahman Capital is also relatively very bullish on the stock, setting aside 12.03 percent of its 13F equity portfolio to VRT.
Seeing as Vertiv Holdings Co (NYSE:VRT) has experienced a decline in interest from hedge fund managers, we can see that there was a specific group of funds who sold off their positions entirely last quarter. It's worth mentioning that Ricky Sandler's Eminence Capital dropped the biggest position of all the hedgies followed by Insider Monkey, comprising about $91.2 million in stock. Daniel Lascano's fund, Lomas Capital Management, also dropped its stock, about $53.5 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest fell by 11 funds last quarter.
Let's check out hedge fund activity in other stocks similar to Vertiv Holdings Co (NYSE:VRT). We will take a look at Columbia Sportswear Company (NASDAQ:COLM), Toll Brothers Inc (NYSE:TOL), Prosperity Bancshares, Inc. (NYSE:PB), MasTec, Inc. (NYSE:MTZ), Mattel, Inc. (NASDAQ:MAT), Grupo Aval Acciones y Valores S.A. (NYSE:AVAL), and Ascendis Pharma A/S (NASDAQ:ASND). All of these stocks' market caps are closest to VRT's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position COLM,21,185359,7 TOL,30,699227,-4 PB,21,96958,5 MTZ,36,334673,4 MAT,25,872671,0 AVAL,5,9921,1 ASND,28,2078115,-3 Average,23.7,610989,1.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 23.7 hedge funds with bullish positions and the average amount invested in these stocks was $611 million. That figure was $997 million in VRT's case. MasTec, Inc. (NYSE:MTZ) is the most popular stock in this table. On the other hand Grupo Aval Acciones y Valores S.A. (NYSE:AVAL) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Vertiv Holdings Co (NYSE:VRT) is more popular among hedge funds. Our overall hedge fund sentiment score for VRT is 66.9. 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 19.3% in 2021 through June 25th but still managed to beat the market by 4.8 percentage points. Hedge funds were also right about betting on VRT as the stock returned 35.8% since the end of March (through 6/25) 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.