Like everyone else, elite investors make mistakes. Some of their top consensus picks, such as Amazon, Facebook and Alibaba, have not done well in Q4 due to various reasons. Nevertheless, the data show elite investors' consensus picks have done well on average over the long-term. The top 20 stocks among hedge funds beat the S&P 500 Index ETF by 4 percentage points so far this year. Because their consensus picks have done well, we pay attention to what elite funds think before doing extensive research on a stock. In this article, we take a closer look at Verint Systems Inc. (NASDAQ:VRNT) from the perspective of those elite funds.
Verint Systems Inc. (NASDAQ:VRNT) was in 23 hedge funds' portfolios at the end of the second quarter of 2019. VRNT has experienced an increase in hedge fund interest recently. There were 22 hedge funds in our database with VRNT positions at the end of the previous quarter. Our calculations also showed that VRNT isn't among the 30 most popular stocks among hedge funds (view the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
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. We're going to take a gander at the fresh hedge fund action encompassing Verint Systems Inc. (NASDAQ:VRNT).
What have hedge funds been doing with Verint Systems Inc. (NASDAQ:VRNT)?
At the end of the second quarter, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 5% from the previous quarter. On the other hand, there were a total of 18 hedge funds with a bullish position in VRNT a year ago. With the smart money's positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
More specifically, RGM Capital was the largest shareholder of Verint Systems Inc. (NASDAQ:VRNT), with a stake worth $116.3 million reported as of the end of March. Trailing RGM Capital was Fisher Asset Management, which amassed a stake valued at $102.5 million. SQN Investors, Jericho Capital Asset Management, and GLG Partners were also very fond of the stock, giving the stock large weights in their portfolios.
As industrywide interest jumped, some big names were leading the bulls' herd. Jericho Capital Asset Management, managed by Josh Resnick, initiated the most outsized position in Verint Systems Inc. (NASDAQ:VRNT). Jericho Capital Asset Management had $28.7 million invested in the company at the end of the quarter. John Overdeck and David Siegel's Two Sigma Advisors also initiated a $1 million position during the quarter. The other funds with brand new VRNT positions are Paul Tudor Jones's Tudor Investment Corp, Michael Gelband's ExodusPoint Capital, and Matthew Hulsizer's PEAK6 Capital Management.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Verint Systems Inc. (NASDAQ:VRNT) but similarly valued. We will take a look at UniFirst Corporation (NYSE:UNF), BJ's Wholesale Club Holdings, Inc. (NYSE:BJ), Omnicell, Inc. (NASDAQ:OMCL), and Laureate Education, Inc. (NASDAQ:LAUR). This group of stocks' market values are closest to VRNT's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position UNF,23,182723,2 BJ,33,437524,11 OMCL,18,96471,3 LAUR,23,427225,2 Average,24.25,285986,4.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.25 hedge funds with bullish positions and the average amount invested in these stocks was $286 million. That figure was $424 million in VRNT's case. BJ's Wholesale Club Holdings, Inc. (NYSE:BJ) is the most popular stock in this table. On the other hand Omnicell, Inc. (NASDAQ:OMCL) is the least popular one with only 18 bullish hedge fund positions. Verint Systems Inc. (NASDAQ:VRNT) 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately VRNT wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); VRNT investors were disappointed as the stock returned -20.5% 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.