"Market conditions are changing. The continued rise in interest rates suggests we are in the early stages of a bond bear market, which could intensify as central banks withdraw liquidity. The receding tide of liquidity will start to reveal more rocks beyond what has been exposed in emerging markets so far, and the value of a value discipline will be in avoiding the biggest capital-destroying rocks. If a rock emerges on the crowded shore of U.S. momentum, it could result in a major liquidity challenge, as momentum is often most intense on the downside as a crowded trade reverses. So investors are facing a large potential trade-off right now: continue to bet on the current dominance of momentum and the S&P 500, or bet on change and take an active value bet in names with attractive value and optionality, but with negative momentum," said Clearbridge Investments in its market commentary. We aren't sure whether long-term interest rates will top 5% and value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. This article will lay out and discuss the hedge fund and institutional investor sentiment towards Verisign, Inc. (NASDAQ:VRSN).
Verisign, Inc. (NASDAQ:VRSN) shareholders have witnessed an increase in activity from the world's largest hedge funds in recent months. Our calculations also showed that vrsn 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 18 percentage points since May 2014 through December 3, 2018 (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.
[caption id="attachment_332520" align="aligncenter" width="450"] Warren Buffett of Berkshire Hathaway[/caption]
We're going to take a look at the key hedge fund action encompassing Verisign, Inc. (NASDAQ:VRSN).
What does the smart money think about Verisign, Inc. (NASDAQ:VRSN)?
Heading into the fourth quarter of 2018, a total of 29 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 16% from the second quarter of 2018. Below, you can check out the change in hedge fund sentiment towards VRSN over the last 13 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey's hedge fund database, Berkshire Hathaway, managed by Warren Buffett, holds the most valuable position in Verisign, Inc. (NASDAQ:VRSN). Berkshire Hathaway has a $2.074 billion position in the stock, comprising 0.9% of its 13F portfolio. The second most bullish fund manager is Renaissance Technologies, managed by Jim Simons, which holds a $1.1269 billion position; 1.2% of its 13F portfolio is allocated to the stock. Remaining peers that are bullish consist of D. E. Shaw's D E Shaw, William von Mueffling's Cantillon Capital Management and William von Mueffling's Cantillon Capital Management.
Now, key money managers were leading the bulls' herd. Clinton Group, managed by George Hall, assembled the most outsized position in Verisign, Inc. (NASDAQ:VRSN). Clinton Group had $1.8 million invested in the company at the end of the quarter. Israel Englander's Millennium Management also initiated a $1.6 million position during the quarter. The following funds were also among the new VRSN investors: Paul Marshall and Ian Wace's Marshall Wace LLP, Louis Navellier's Navellier & Associates, and David Andre and Astro Teller's Cerebellum Capital.
Let's now review hedge fund activity in other stocks similar to Verisign, Inc. (NASDAQ:VRSN). These stocks are Expedia Group, Inc. (NASDAQ:EXPE), Eversource Energy (NYSE:ES), Dollar Tree, Inc. (NASDAQ:DLTR), and Ventas, Inc. (NYSE:VTR). All of these stocks' market caps match VRSN's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position EXPE,37,3118988,-1 ES,19,708140,4 DLTR,53,1885624,5 VTR,15,224805,0 Average,31,1484389,2 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 31 hedge funds with bullish positions and the average amount invested in these stocks was $1.48 billion. That figure was $4.82 billion in VRSN's case. Dollar Tree, Inc. (NASDAQ:DLTR) is the most popular stock in this table. On the other hand Ventas, Inc. (NYSE:VTR) is the least popular one with only 15 bullish hedge fund positions. Verisign, Inc. (NASDAQ:VRSN) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. In this regard DLTR might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.