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Is Vertiv (VRT) Stock A Buy or Sell?

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Asma UL Husna
·5 min read
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In this article we will analyze whether Vertiv Holdings Co (NYSE:VRT) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There's no better way to get these firms' immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market by double digits annually.

Is Vertiv (VRT) stock a buy or sell? Money managers were in a pessimistic mood. The number of long hedge fund bets fell by 1 in recent months. Vertiv Holdings Co (NYSE:VRT) was in 50 hedge funds' portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 51. Our calculations also showed that VRT isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings).

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 124 percentage points since March 2017 (see the details here).

Ken Griffin CITADEL INVESTMENT GROUP
Ken Griffin CITADEL INVESTMENT GROUP

Ken Griffin of Citadel Investment Group

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best hydrogen fuel cell stocks to pick the next Tesla that will deliver a 10x return. 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 homepage (or at the end of this article). Keeping this in mind we're going to analyze the key hedge fund action surrounding Vertiv Holdings Co (NYSE:VRT).

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

Heading into the first quarter of 2021, a total of 50 of the hedge funds tracked by Insider Monkey were long this stock, a change of -2% from the third quarter of 2020. The graph below displays the number of hedge funds with bullish position in VRT over the last 22 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Alyeska Investment Group held the most valuable stake in Vertiv Holdings Co (NYSE:VRT), which was worth $138.8 million at the end of the fourth quarter. On the second spot was Brahman Capital which amassed $138.5 million worth of shares. Citadel Investment Group, Eminence Capital, and Senator Investment Group 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 SAYA Management allocated the biggest weight to Vertiv Holdings Co (NYSE:VRT), around 13.87% of its 13F portfolio. Brahman Capital is also relatively very bullish on the stock, dishing out 12.1 percent of its 13F equity portfolio to VRT.

Seeing as Vertiv Holdings Co (NYSE:VRT) has experienced a decline in interest from hedge fund managers, it's easy to see that there is a sect of hedgies that slashed their positions entirely last quarter. It's worth mentioning that Bart Baum's Ionic Capital Management cut the largest investment of all the hedgies watched by Insider Monkey, valued at close to $24.3 million in stock, and Robert Henry Lynch's Aristeia Capital was right behind this move, as the fund dumped about $11.3 million worth. These bearish behaviors are important to note, as total hedge fund interest fell by 1 funds last quarter.

Let's also examine hedge fund activity in other stocks similar to Vertiv Holdings Co (NYSE:VRT). We will take a look at Credit Acceptance Corp. (NASDAQ:CACC), Perrigo Co Plc (NYSE:PRGO), TopBuild Corp (NYSE:BLD), Mattel, Inc. (NASDAQ:MAT), Devon Energy Corporation (NYSE:DVN), Western Alliance Bancorporation (NYSE:WAL), and Targa Resources Corp (NYSE:TRGP). All of these stocks' market caps are similar to VRT's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CACC,29,771364,0 PRGO,31,363463,2 BLD,19,42185,-2 MAT,25,858930,-1 DVN,45,709230,1 WAL,22,112754,-6 TRGP,29,488973,-1 Average,28.6,478128,-1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 28.6 hedge funds with bullish positions and the average amount invested in these stocks was $478 million. That figure was $1345 million in VRT's case. Devon Energy Corporation (NYSE:DVN) is the most popular stock in this table. On the other hand TopBuild Corp (NYSE:BLD) is the least popular one with only 19 bullish hedge fund positions. Compared to these stocks Vertiv Holdings Co (NYSE:VRT) is more popular among hedge funds. Our overall hedge fund sentiment score for VRT is 83.4. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks returned 5.3% in 2021 through March 19th but still managed to beat the market by 0.8 percentage points. Hedge funds were also right about betting on VRT as the stock returned 9.5% since the end of December (through 3/19) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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

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