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In this article we will check out the progression of hedge fund sentiment towards Vertiv Holdings Co. (NYSE:VRT) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Vertiv Holdings Co. (NYSE:VRT) shareholders have witnessed an increase in enthusiasm from smart money in recent months. VRT was in 39 hedge funds' portfolios at the end of the first quarter of 2020. There were 35 hedge funds in our database with VRT positions at the end of the previous quarter. Our calculations also showed that VRT isn't among the 30 most popular stocks among hedge funds (click for Q1 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 eyes of most stock holders, hedge funds are perceived as worthless, old investment tools of yesteryear. While there are over 8000 funds in operation today, Our experts choose to focus on the aristocrats of this group, about 850 funds. These money managers control most of the hedge fund industry's total capital, and by tracking their top investments, Insider Monkey has found several investment strategies that have historically defeated the broader indices. Insider Monkey's flagship short hedge fund strategy surpassed the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
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Ricky Sandler of Eminence Capital[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we're going to take a glance at the latest hedge fund action surrounding Vertiv Holdings Co. (NYSE:VRT).
Hedge fund activity in Vertiv Holdings Co. (NYSE:VRT)
At the end of the first quarter, a total of 39 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 11% from one quarter earlier. By comparison, 28 hedge funds held shares or bullish call options in VRT a year ago. With hedge funds' sentiment swirling, there exists a select group of noteworthy hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).
Among these funds, Eminence Capital held the most valuable stake in Vertiv Holdings Co. (NYSE:VRT), which was worth $153.9 million at the end of the third quarter. On the second spot was Brahman Capital which amassed $79.7 million worth of shares. Alyeska Investment Group, Lomas Capital Management, and Locust Wood Capital Advisers 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 Brahman Capital allocated the biggest weight to Vertiv Holdings Co. (NYSE:VRT), around 9.37% of its 13F portfolio. Corsair Capital Management is also relatively very bullish on the stock, setting aside 8.08 percent of its 13F equity portfolio to VRT.
Consequently, some big names were leading the bulls' herd. Eminence Capital, managed by Ricky Sandler, assembled the largest position in Vertiv Holdings Co. (NYSE:VRT). Eminence Capital had $153.9 million invested in the company at the end of the quarter. Daniel Lascano's Lomas Capital Management also made a $55 million investment in the stock during the quarter. The other funds with new positions in the stock are Jay Petschek and Steven Major's Corsair Capital Management, Nehal Chopra's Ratan Capital Group, and Anand More's SAYA Management.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Vertiv Holdings Co. (NYSE:VRT) but similarly valued. We will take a look at Continental Resources, Inc. (NYSE:CLR), Stantec Inc. (NYSE:STN), Brixmor Property Group Inc (NYSE:BRX), and Affiliated Managers Group, Inc. (NYSE:AMG). This group of stocks' market caps match VRT's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CLR,26,66933,-12 STN,12,52596,3 BRX,28,79124,12 AMG,27,309620,-11 Average,23.25,127068,-2 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 23.25 hedge funds with bullish positions and the average amount invested in these stocks was $127 million. That figure was $541 million in VRT's case. Brixmor Property Group Inc (NYSE:BRX) is the most popular stock in this table. On the other hand Stantec Inc. (NYSE:STN) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Vertiv Holdings Co. (NYSE:VRT) is more popular among hedge funds. 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 returned 8.3% in 2020 through the end of May but still managed to beat the market by 13.2 percentage points. Hedge funds were also right about betting on VRT as the stock returned 47.2% so far in Q2 (through the end of May) 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.
Disclosure: None. This article was originally published at Insider Monkey.