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Is VCYT A Good Stock To Buy Now?

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Debasis Saha
·6 min read
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The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 817 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of September 30th, about a month before the elections. In this article we look at what those investors think of Veracyte Inc (NASDAQ:VCYT).

Is VCYT a good stock to buy now? Veracyte Inc (NASDAQ:VCYT) investors should be aware of an increase in enthusiasm from smart money in recent months. Veracyte Inc (NASDAQ:VCYT) was in 12 hedge funds' portfolios at the end of September. The all time high for this statistics is 24. Our calculations also showed that VCYT isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

According to most stock holders, hedge funds are perceived as slow, outdated financial tools of yesteryear. While there are more than 8000 funds in operation at the moment, Our researchers hone in on the moguls of this group, around 850 funds. Most estimates calculate that this group of people have their hands on the majority of all hedge funds' total asset base, and by shadowing their best stock picks, Insider Monkey has uncovered numerous investment strategies that have historically beaten the market. Insider Monkey's flagship short hedge fund strategy exceeded the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 13% since February 2017 (through November 17th) even though the market was up 65% during the same period. We just shared a list of 6 short targets in our latest quarterly update .

Roger Ibbotson of Zebra Capital Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind let's take a gander at the recent hedge fund action surrounding Veracyte Inc (NASDAQ:VCYT).

Do Hedge Funds Think VCYT Is A Good Stock To Buy Now?

At the end of the third quarter, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 33% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards VCYT over the last 21 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is VCYT A Good Stock To Buy?
Is VCYT A Good Stock To Buy?

More specifically, Clough Capital Partners was the largest shareholder of Veracyte Inc (NASDAQ:VCYT), with a stake worth $7.3 million reported as of the end of September. Trailing Clough Capital Partners was Balyasny Asset Management, which amassed a stake valued at $7.2 million. Millennium Management, Citadel Investment Group, and Royce & Associates were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Zebra Capital Management allocated the biggest weight to Veracyte Inc (NASDAQ:VCYT), around 1.14% of its 13F portfolio. Clough Capital Partners is also relatively very bullish on the stock, setting aside 0.52 percent of its 13F equity portfolio to VCYT.

With a general bullishness amongst the heavyweights, specific money managers were leading the bulls' herd. Millennium Management, managed by Israel Englander, established the most valuable position in Veracyte Inc (NASDAQ:VCYT). Millennium Management had $4.2 million invested in the company at the end of the quarter. Ken Griffin's Citadel Investment Group also made a $3.1 million investment in the stock during the quarter. The following funds were also among the new VCYT investors: Matthew Halbower's Pentwater Capital Management, Roger Ibbotson's Zebra Capital Management, and Peter Muller's PDT Partners.

Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Veracyte Inc (NASDAQ:VCYT) but similarly valued. We will take a look at Cal-Maine Foods Inc (NASDAQ:CALM), KAR Auction Services Inc (NYSE:KAR), Aurinia Pharmaceuticals Inc (NASDAQ:AUPH), Methanex Corporation (NASDAQ:MEOH), CareDx, Inc. (NASDAQ:CDNA), Hilltop Holdings Inc. (NYSE:HTH), and Cantel Medical Corp. (NYSE:CMD). This group of stocks' market caps are similar to VCYT's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CALM,24,251802,9 KAR,41,321008,11 AUPH,32,507022,3 MEOH,16,89966,-1 CDNA,25,228629,2 HTH,25,120224,2 CMD,21,205405,2 Average,26.3,246294,4 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 26.3 hedge funds with bullish positions and the average amount invested in these stocks was $246 million. That figure was $27 million in VCYT's case. KAR Auction Services Inc (NYSE:KAR) is the most popular stock in this table. On the other hand Methanex Corporation (NASDAQ:MEOH) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks Veracyte Inc (NASDAQ:VCYT) is even less popular than MEOH. Our overall hedge fund sentiment score for VCYT is 23. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Hedge funds clearly dropped the ball on VCYT as the stock delivered strong returns, though hedge funds' consensus picks still generated respectable returns. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. A small number of hedge funds were also right about betting on VCYT as the stock returned 85.7% since Q3 (through December 8th) and outperformed the market by an even larger margin.

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Disclosure: None. This article was originally published at Insider Monkey.

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