Concerns over rising interest rates and expected further rate increases have hit several stocks hard during the fourth quarter of 2018. Trends reversed 180 degrees during the first half of 2019 amid Powell's pivot and optimistic expectations towards a trade deal with China. Hedge funds and institutional investors tracked by Insider Monkey usually invest a disproportionate amount of their portfolios in smaller cap stocks. We have been receiving indications that hedge funds were increasing their overall exposure in the second quarter and this is one of the factors behind the recent movements in major indices. In this article, we will take a closer look at hedge fund sentiment towards Verisign, Inc. (NASDAQ:VRSN).
Is Verisign, Inc. (NASDAQ:VRSN) worth your attention right now? Money managers are becoming hopeful. The number of bullish hedge fund positions increased by 1 in recent months. Our calculations also showed that VRSN isn't among the 30 most popular stocks among hedge funds. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? 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 some fund managers who are betting on Dow reaching 40000 in a year, 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 peek at the fresh hedge fund action surrounding Verisign, Inc. (NASDAQ:VRSN).
Hedge fund activity in Verisign, Inc. (NASDAQ:VRSN)
Heading into the third quarter of 2019, a total of 32 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 3% from the first quarter of 2019. The graph below displays the number of hedge funds with bullish position in VRSN over the last 16 quarters. With the smart money's positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).
More specifically, Berkshire Hathaway was the largest shareholder of Verisign, Inc. (NASDAQ:VRSN), with a stake worth $2709.2 million reported as of the end of March. Trailing Berkshire Hathaway was Renaissance Technologies, which amassed a stake valued at $1608.1 million. D E Shaw, Cantillon Capital Management, and AQR Capital Management were also very fond of the stock, giving the stock large weights in their portfolios.
Now, some big names have been driving this bullishness. Melvin Capital Management, managed by Gabriel Plotkin, created the largest position in Verisign, Inc. (NASDAQ:VRSN). Melvin Capital Management had $73.2 million invested in the company at the end of the quarter. Steve Cohen's Point72 Asset Management also made a $6.9 million investment in the stock during the quarter. The other funds with brand new VRSN positions are Ben Levine, Andrew Manuel and Stefan Renold's LMR Partners, Karim Abbadi and Edward McBride's Centiva Capital, and Benjamin A. Smith's Laurion Capital Management.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Verisign, Inc. (NASDAQ:VRSN) but similarly valued. We will take a look at Baker Hughes, a GE company (NYSE:BHGE), MPLX LP (NYSE:MPLX), Global Payments Inc (NYSE:GPN), and McKesson Corporation (NYSE:MCK). All of these stocks' market caps are similar to VRSN's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BHGE,18,337104,-5 MPLX,11,511213,1 GPN,37,1255484,8 MCK,36,2070783,4 Average,25.5,1043646,2 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 25.5 hedge funds with bullish positions and the average amount invested in these stocks was $1044 million. That figure was $6013 million in VRSN's case. Global Payments Inc (NYSE:GPN) is the most popular stock in this table. On the other hand MPLX LP (NYSE:MPLX) is the least popular one with only 11 bullish hedge fund positions. Verisign, Inc. (NASDAQ:VRSN) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but 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 VRSN wasn't nearly as popular as these 20 stocks and hedge funds that were betting on VRSN were disappointed as the stock returned -9.8% 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 this year.
Disclosure: None. This article was originally published at Insider Monkey.