Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 750 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Varex Imaging Corporation (NASDAQ:VREX).
Varex Imaging Corporation (NASDAQ:VREX) shares haven't seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 20 hedge funds' portfolios at the end of the second quarter of 2019. At the end of this article we will also compare VREX to other stocks including Intrexon Corp (NASDAQ:XON), FormFactor, Inc. (NASDAQ:FORM), and Innovative Industrial Properties, Inc. (NYSE:IIPR) to get a better sense of its popularity. Our calculations also showed that VREX isn't among the 30 most popular stocks among hedge funds (see the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
At the moment there are many methods investors can use to appraise their holdings. Two of the less known methods are hedge fund and insider trading indicators. Our researchers have shown that, historically, those who follow the best picks of the elite money managers can trounce the market by a healthy margin (see the details here).
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 take a glance at the key hedge fund action encompassing Varex Imaging Corporation (NASDAQ:VREX).
Hedge fund activity in Varex Imaging Corporation (NASDAQ:VREX)
At Q2's end, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. On the other hand, there were a total of 10 hedge funds with a bullish position in VREX a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Richard S. Pzena's Pzena Investment Management has the most valuable position in Varex Imaging Corporation (NASDAQ:VREX), worth close to $36.5 million, corresponding to 0.2% of its total 13F portfolio. Sitting at the No. 2 spot is D E Shaw, managed by D. E. Shaw, which holds a $12.5 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining peers that are bullish include Chuck Royce's Royce & Associates, Peter Schliemann's Rutabaga Capital Management and Noam Gottesman's GLG Partners.
Due to the fact that Varex Imaging Corporation (NASDAQ:VREX) has experienced a decline in interest from the smart money, we can see that there lies a certain "tier" of money managers who sold off their entire stakes in the second quarter. Intriguingly, Israel Englander's Millennium Management sold off the largest position of all the hedgies tracked by Insider Monkey, valued at an estimated $0.7 million in stock, and Minhua Zhang's Weld Capital Management was right behind this move, as the fund dropped about $0.5 million worth. These bearish behaviors are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's go over hedge fund activity in other stocks similar to Varex Imaging Corporation (NASDAQ:VREX). These stocks are Intrexon Corp (NASDAQ:XON), FormFactor, Inc. (NASDAQ:FORM), Innovative Industrial Properties, Inc. (NYSE:IIPR), and Sonos, Inc. (NASDAQ:SONO). This group of stocks' market caps match VREX's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position XON,10,82829,2 FORM,14,44283,3 IIPR,10,24592,1 SONO,21,84443,-1 Average,13.75,59037,1.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.75 hedge funds with bullish positions and the average amount invested in these stocks was $59 million. That figure was $98 million in VREX's case. Sonos, Inc. (NASDAQ:SONO) is the most popular stock in this table. On the other hand Intrexon Corp (NASDAQ:XON) is the least popular one with only 10 bullish hedge fund positions. Varex Imaging Corporation (NASDAQ:VREX) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately VREX wasn't nearly as popular as these 20 stocks and hedge funds that were betting on VREX were disappointed as the stock returned -6.9% 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 this year.
Disclosure: None. This article was originally published at Insider Monkey.