Billionaire hedge fund managers such as David Abrams, Steve Cohen and Stan Druckenmiller can generate millions or even billions of dollars every year by pinning down high-potential small-cap stocks and pouring cash into these candidates. Small-cap stocks are overlooked by most investors, brokerage houses, and financial services hubs, while the unlimited research abilities of the big players within the hedge fund industry can easily identify the undervalued and high-potential stocks that reside the ignored corners of equity markets. There are numerous small-cap stocks that have turned out to be great winners, which is one of the main reasons the Insider Monkey team pays close attention to the hedge fund activity in relation to these stocks.
VEON Ltd. (NASDAQ:VEON) has seen an increase in hedge fund interest lately. VEON was in 15 hedge funds' portfolios at the end of the first quarter of 2019. There were 9 hedge funds in our database with VEON holdings at the end of the previous quarter. Our calculations also showed that VEON isn't among the 30 most popular stocks among hedge funds.
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.
We're going to go over the recent hedge fund action regarding VEON Ltd. (NASDAQ:VEON).
How are hedge funds trading VEON Ltd. (NASDAQ:VEON)?
Heading into the second quarter of 2019, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 67% from one quarter earlier. By comparison, 11 hedge funds held shares or bullish call options in VEON 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.
Among these funds, Millennium Management held the most valuable stake in VEON Ltd. (NASDAQ:VEON), which was worth $16.1 million at the end of the first quarter. On the second spot was Moon Capital which amassed $12.9 million worth of shares. Moreover, Segantii Capital, Arrowstreet Capital, and Laurion Capital Management were also bullish on VEON Ltd. (NASDAQ:VEON), allocating a large percentage of their portfolios to this stock.
As one would reasonably expect, key hedge funds have jumped into VEON Ltd. (NASDAQ:VEON) headfirst. Moon Capital, managed by John W. Moon, established the most valuable position in VEON Ltd. (NASDAQ:VEON). Moon Capital had $12.9 million invested in the company at the end of the quarter. Simon Sadler's Segantii Capital also initiated a $10.5 million position during the quarter. The other funds with brand new VEON positions are Benjamin A. Smith's Laurion Capital Management, Scott Bessent's Key Square Capital Management, and D. E. Shaw's D E Shaw.
Let's now take a look at hedge fund activity in other stocks similar to VEON Ltd. (NASDAQ:VEON). We will take a look at Apple Hospitality REIT Inc (NYSE:APLE), Churchill Downs Incorporated (NASDAQ:CHDN), Umpqua Holdings Corp (NASDAQ:UMPQ), and Graham Holdings Co (NYSE:GHC). This group of stocks' market values are similar to VEON's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position APLE,13,87640,2 CHDN,29,519547,3 UMPQ,20,218914,0 GHC,15,573233,-4 Average,19.25,349834,0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.25 hedge funds with bullish positions and the average amount invested in these stocks was $350 million. That figure was $72 million in VEON's case. Churchill Downs Incorporated (NASDAQ:CHDN) is the most popular stock in this table. On the other hand Apple Hospitality REIT Inc (NYSE:APLE) is the least popular one with only 13 bullish hedge fund positions. VEON Ltd. (NASDAQ:VEON) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. A small number of hedge funds were also right about betting on VEON as the stock returned 29.7% during the same time frame and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.