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Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 817 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds' 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about Vectrus Inc (NYSE:VEC) in this article.
Is VEC a good stock to buy now? Vectrus Inc (NYSE:VEC) was in 17 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistic is 18. VEC investors should be aware of an increase in activity from the world's largest hedge funds recently. There were 16 hedge funds in our database with VEC positions at the end of the second quarter. Our calculations also showed that VEC 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.
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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 66 percentage points since March 2017 (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 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Donald Sussman of Paloma Partners
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 review the fresh hedge fund action surrounding Vectrus Inc (NYSE:VEC).
Do Hedge Funds Think VEC Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 6% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards VEC over the last 21 quarters. With the smart money's sentiment swirling, there exists a select group of key hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
The largest stake in Vectrus Inc (NYSE:VEC) was held by Royce & Associates, which reported holding $15.3 million worth of stock at the end of September. It was followed by Arrowstreet Capital with a $5 million position. Other investors bullish on the company included Prospector Partners, AQR Capital Management, and D E Shaw. In terms of the portfolio weights assigned to each position Factorial Partners allocated the biggest weight to Vectrus Inc (NYSE:VEC), around 0.7% of its 13F portfolio. Prospector Partners is also relatively very bullish on the stock, designating 0.57 percent of its 13F equity portfolio to VEC.
As industrywide interest jumped, specific money managers were leading the bulls' herd. Millennium Management, managed by Israel Englander, initiated the biggest position in Vectrus Inc (NYSE:VEC). Millennium Management had $1 million invested in the company at the end of the quarter. Greg Eisner's Engineers Gate Manager also made a $0.6 million investment in the stock during the quarter. The other funds with brand new VEC positions are Minhua Zhang's Weld Capital Management and Donald Sussman's Paloma Partners.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Vectrus Inc (NYSE:VEC) but similarly valued. We will take a look at Universal Insurance Holdings, Inc. (NYSE:UVE), RPT Realty (NYSE:RPT), Koppers Holdings Inc. (NYSE:KOP), G1 Therapeutics, Inc. (NASDAQ:GTHX), Mechel PAO (NYSE:MTL), eGain Corporation (NASDAQ:EGAN), and Luther Burbank Corporation (NASDAQ:LBC). All of these stocks' market caps match VEC's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position UVE,14,29470,-2 RPT,17,25016,3 KOP,12,15724,1 GTHX,13,30837,2 MTL,3,1788,0 EGAN,11,36330,0 LBC,4,3020,2 Average,10.6,20312,0.9 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.6 hedge funds with bullish positions and the average amount invested in these stocks was $20 million. That figure was $40 million in VEC's case. RPT Realty (NYSE:RPT) is the most popular stock in this table. On the other hand Mechel PAO (NYSE:MTL) is the least popular one with only 3 bullish hedge fund positions. Vectrus Inc (NYSE:VEC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for VEC is 84.3. 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. 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 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. Hedge funds were also right about betting on VEC as the stock returned 25.7% since the end of Q3 (through 12/14) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.