Many investors, including Paul Tudor Jones or Stan Druckenmiller, have been saying before last year's Q4 market crash that the stock market is overvalued due to a low interest rate environment that leads to companies swapping their equity for debt and focusing mostly on short-term performance such as beating the quarterly earnings estimates. In the first half of 2019, most investors recovered all of their Q4 losses as sentiment shifted and optimism dominated the US China trade negotiations. Nevertheless, many of the stocks that delivered strong returns in the first half still sport strong fundamentals and their gains were more related to the general market sentiment rather than their individual performance and hedge funds kept their bullish stance. In this article we will find out how hedge fund sentiment to Verisign, Inc. (NASDAQ:VRSN) changed recently.
Verisign, Inc. (NASDAQ:VRSN) was in 30 hedge funds' portfolios at the end of September. VRSN investors should pay attention to a decrease in support from the world's most elite money managers lately. There were 32 hedge funds in our database with VRSN positions at the end of the previous quarter. Our calculations also showed that VRSN isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the 21st century investor’s toolkit there are plenty of methods stock traders can use to size up their holdings. A couple of the most innovative methods are hedge fund and insider trading indicators. We have shown that, historically, those who follow the best picks of the top fund managers can outpace the S&P 500 by a very impressive amount (see the details here).
[caption id="attachment_364853" align="aligncenter" width="594"] William Von Mueffling of Cantillon Capital Management[/caption]
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. We're going to go over the recent hedge fund action surrounding Verisign, Inc. (NASDAQ:VRSN).
Hedge fund activity in Verisign, Inc. (NASDAQ:VRSN)
At the end of the third quarter, a total of 30 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -6% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards VRSN over the last 17 quarters. With hedgies' capital changing hands, there exists a select group of key hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Berkshire Hathaway, managed by Warren Buffett, holds the biggest position in Verisign, Inc. (NASDAQ:VRSN). Berkshire Hathaway has a $2.4433 billion position in the stock, comprising 1.1% of its 13F portfolio. The second most bullish fund is Renaissance Technologies, with a $1.5623 billion position; the fund has 1.3% of its 13F portfolio invested in the stock. Remaining professional money managers that are bullish consist of David E. Shaw's D E Shaw, William von Mueffling's Cantillon Capital Management and Cliff Asness's AQR Capital Management. In terms of the portfolio weights assigned to each position Atalan Capital allocated the biggest weight to Verisign, Inc. (NASDAQ:VRSN), around 4.44% of its portfolio. Cantillon Capital Management is also relatively very bullish on the stock, setting aside 2.78 percent of its 13F equity portfolio to VRSN.
Due to the fact that Verisign, Inc. (NASDAQ:VRSN) has faced falling interest from hedge fund managers, logic holds that there was a specific group of hedgies who sold off their entire stakes by the end of the third quarter. It's worth mentioning that Gabriel Plotkin's Melvin Capital Management cut the largest position of the "upper crust" of funds monitored by Insider Monkey, totaling an estimated $73.2 million in stock. Dmitry Balyasny's fund, Balyasny Asset Management, also said goodbye to its stock, about $18.9 million worth. These moves are intriguing to say the least, as total hedge fund interest dropped by 2 funds by the end of the third quarter.
Let's now take a look at 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 Corning Incorporated (NYSE:GLW), Telefonica Brasil SA (NYSE:VIV), Interactive Brokers Group, Inc. (NASDAQ:IBKR), and Microchip Technology Incorporated (NASDAQ:MCHP). This group of stocks' market values are closest to VRSN's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GLW,27,203363,1 VIV,13,92351,1 IBKR,24,1030551,0 MCHP,29,1167981,3 Average,23.25,623562,1.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 23.25 hedge funds with bullish positions and the average amount invested in these stocks was $624 million. That figure was $5568 million in VRSN's case. Microchip Technology Incorporated (NASDAQ:MCHP) is the most popular stock in this table. On the other hand Telefonica Brasil SA (NYSE:VIV) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks Verisign, Inc. (NASDAQ:VRSN) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 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 1.1% during the first two months of the fourth 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 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.