Concerns over rising interest rates and expected further rate increases have hit several stocks hard during the fourth quarter of 2018. Trends reversed 180 degrees in 2019 amid Powell's pivot and optimistic expectations towards a trade deal with China. Hedge funds and institutional investors tracked by Insider Monkey usually invest a disproportionate amount of their portfolios in smaller cap stocks. We have been receiving indications that hedge funds were increasing their overall exposure in the third quarter and this is one of the factors behind the recent movements in major indices. In this article, we will take a closer look at hedge fund sentiment towards Vuzix Corporation (NASDAQ:VUZI).
Is Vuzix Corporation (NASDAQ:VUZI) a healthy stock for your portfolio? Investors who are in the know are getting less bullish. The number of long hedge fund positions went down by 2 in recent months. Our calculations also showed that VUZI isn't among the 30 most popular stocks among hedge funds. VUZI was in 3 hedge funds' portfolios at the end of the third quarter of 2019. There were 5 hedge funds in our database with VUZI positions at the end of the previous quarter.
According to most investors, hedge funds are perceived as unimportant, old financial tools of yesteryear. While there are more than 8000 funds trading today, Our experts choose to focus on the leaders of this group, around 750 funds. These investment experts watch over most of the smart money's total asset base, and by watching their highest performing investments, Insider Monkey has unsheathed many investment strategies that have historically outstripped the broader indices. Insider Monkey's flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points per year since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
[caption id="attachment_27676" align="aligncenter" width="355"] Israel Englander of Millennium Management[/caption]
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. We're going to review the new hedge fund action regarding Vuzix Corporation (NASDAQ:VUZI).
How are hedge funds trading Vuzix Corporation (NASDAQ:VUZI)?
Heading into the fourth quarter of 2019, a total of 3 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -40% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in VUZI over the last 17 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Millennium Management was the largest shareholder of Vuzix Corporation (NASDAQ:VUZI), with a stake worth $0.2 million reported as of the end of September. Trailing Millennium Management was Citadel Investment Group, which amassed a stake valued at $0.2 million. LMR Partners was 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 LMR Partners allocated the biggest weight to Vuzix Corporation (NASDAQ:VUZI), around 0.0015% of its portfolio. Millennium Management is also relatively very bullish on the stock, earmarking 0.0003 percent of its 13F equity portfolio to VUZI.
Due to the fact that Vuzix Corporation (NASDAQ:VUZI) has faced bearish sentiment from the aggregate hedge fund industry, we can see that there was a specific group of hedge funds that elected to cut their full holdings heading into Q4. At the top of the heap, Donald Sussman's Paloma Partners cut the largest position of all the hedgies followed by Insider Monkey, totaling close to $0.6 million in stock. David E. Shaw's fund, D E Shaw, also said goodbye to its stock, about $0.6 million worth. These moves are interesting, as total hedge fund interest fell by 2 funds heading into Q4.
Let's also examine hedge fund activity in other stocks similar to Vuzix Corporation (NASDAQ:VUZI). We will take a look at Libbey Inc. (NYSEAMEX:LBY), AgeX Therapeutics, Inc. (NYSEAMEX:AGE), Highpower International Inc (NASDAQ:HPJ), and Hexindai Inc. (NASDAQ:HX). This group of stocks' market valuations match VUZI's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LBY,10,12800,2 AGE,1,5874,0 HPJ,1,5594,0 HX,3,1565,-1 Average,3.75,6458,0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 3.75 hedge funds with bullish positions and the average amount invested in these stocks was $6 million. That figure was $0 million in VUZI's case. Libbey Inc. (NYSEAMEX:LBY) is the most popular stock in this table. On the other hand AgeX Therapeutics, Inc. (NASDAQ:AGE) is the least popular one with only 1 bullish hedge fund positions. Vuzix Corporation (NASDAQ:VUZI) is not the least popular stock in this group but hedge fund interest is still below average. 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 20 most popular stocks among hedge funds returned 34.7% in 2019 through November 22nd and outperformed the S&P 500 ETF (SPY) by 8.5 percentage points. Unfortunately VUZI wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); VUZI investors were disappointed as the stock returned -11% during the fourth quarter (through 11/22) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.