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Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of June. At Insider Monkey, we follow nearly 750 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Veritex Holdings Inc (NASDAQ:VBTX), so let’s take a closer look at the sentiment that surrounds it in the current quarter.
Is Veritex Holdings Inc (NASDAQ:VBTX) a healthy stock for your portfolio? The best stock pickers are taking a pessimistic view. The number of long hedge fund bets went down by 3 lately. Our calculations also showed that VBTX 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.
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. We're going to check out the fresh hedge fund action regarding Veritex Holdings Inc (NASDAQ:VBTX).
What does smart money think about Veritex Holdings Inc (NASDAQ:VBTX)?
At the end of the second quarter, a total of 8 of the hedge funds tracked by Insider Monkey were long this stock, a change of -27% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards VBTX over the last 16 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Mendon Capital Advisors was the largest shareholder of Veritex Holdings Inc (NASDAQ:VBTX), with a stake worth $53 million reported as of the end of March. Trailing Mendon Capital Advisors was Millennium Management, which amassed a stake valued at $10.7 million. Forest Hill Capital, Marshall Wace LLP, and Basswood Capital were also very fond of the stock, giving the stock large weights in their portfolios.
Because Veritex Holdings Inc (NASDAQ:VBTX) has faced declining sentiment from hedge fund managers, it's easy to see that there lies a certain "tier" of funds who were dropping their full holdings by the end of the second quarter. At the top of the heap, Charles Paquelet's Skylands Capital sold off the largest investment of the 750 funds watched by Insider Monkey, totaling an estimated $0.8 million in stock. Benjamin A. Smith's fund, Laurion Capital Management, also dropped its stock, about $0.8 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest fell by 3 funds by the end of the second quarter.
Let's go over hedge fund activity in other stocks similar to Veritex Holdings Inc (NASDAQ:VBTX). We will take a look at Constellium SE (NYSE:CSTM), Frontline Ltd (NYSE:FRO), Industrial Logistics Properties Trust (NASDAQ:ILPT), and Shutterstock Inc (NYSE:SSTK). This group of stocks' market caps are closest to VBTX's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CSTM,37,341497,-4 FRO,13,76629,3 ILPT,9,86585,-7 SSTK,18,89013,1 Average,19.25,148431,-1.75 [/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 $148 million. That figure was $85 million in VBTX's case. Constellium SE (NYSE:CSTM) is the most popular stock in this table. On the other hand Industrial Logistics Properties Trust (NASDAQ:ILPT) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Veritex Holdings Inc (NASDAQ:VBTX) is even less popular than ILPT. Hedge funds dodged a bullet by taking a bearish stance towards VBTX. 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 VBTX wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); VBTX investors were disappointed as the stock returned -6% 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.
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