We are still in an overall bull market and many stocks that smart money investors were piling into surged through October 17th. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 45% and 39% respectively. Hedge funds' top 3 stock picks returned 34.4% this year and beat the S&P 500 ETFs by 13 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like Village Farms International, Inc. (NASDAQ:VFF).
Is Village Farms International, Inc. (NASDAQ:VFF) a good investment today? Hedge funds are in a bullish mood. The number of long hedge fund positions moved up by 1 recently. Our calculations also showed that VFF isn't among the 30 most popular stocks among hedge funds (see the video below). VFF was in 4 hedge funds' portfolios at the end of June. There were 3 hedge funds in our database with VFF positions at the end of the previous quarter. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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 market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let's review the fresh hedge fund action regarding Village Farms International, Inc. (NASDAQ:VFF).
How are hedge funds trading Village Farms International, Inc. (NASDAQ:VFF)?
At Q2's end, a total of 4 of the hedge funds tracked by Insider Monkey were long this stock, a change of 33% from the previous quarter. By comparison, 0 hedge funds held shares or bullish call options in VFF 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.
According to Insider Monkey's hedge fund database, Richard Driehaus's Driehaus Capital has the largest position in Village Farms International, Inc. (NASDAQ:VFF), worth close to $4.8 million, comprising 0.2% of its total 13F portfolio. Coming in second is John Overdeck and David Siegel of Two Sigma Advisors, with a $4.4 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Some other hedge funds and institutional investors that are bullish consist of Israel Englander's Millennium Management, and George Zweig, Shane Haas and Ravi Chander's Signition LP.
Consequently, specific money managers were breaking ground themselves. Driehaus Capital, managed by Richard Driehaus, initiated the largest position in Village Farms International, Inc. (NASDAQ:VFF). Driehaus Capital had $4.8 million invested in the company at the end of the quarter. John Overdeck and David Siegel's Two Sigma Advisors also made a $4.4 million investment in the stock during the quarter. The only other fund with a new position in the stock is Israel Englander's Millennium Management.
Let's check out hedge fund activity in other stocks similar to Village Farms International, Inc. (NASDAQ:VFF). We will take a look at International Money Express, Inc. (NASDAQ:IMXI), Digimarc Corp (NASDAQ:DMRC), Maxar Technologies Inc. (NYSE:MAXR), and New Media Investment Group Inc (NYSE:NEWM). This group of stocks' market values are closest to VFF's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position IMXI,12,97748,1 DMRC,6,50230,3 MAXR,12,43172,5 NEWM,14,52864,-3 Average,11,61004,1.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $61 million. That figure was $10 million in VFF's case. New Media Investment Group Inc (NYSE:NEWM) is the most popular stock in this table. On the other hand Digimarc Corp (NASDAQ:DMRC) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Village Farms International, Inc. (NASDAQ:VFF) is even less popular than DMRC. Hedge funds dodged a bullet by taking a bearish stance towards VFF. Our calculations showed that the top 20 most popular hedge fund stocks returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately VFF wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); VFF investors were disappointed as the stock returned -20.9% during the third quarter 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 many of these stocks already outperformed the market so far in 2019.
Disclosure: None. This article was originally published at Insider Monkey.