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ViaSat, Inc. (VSAT) Fell Out Of Favor With Hedge Funds

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In this article we will analyze whether ViaSat, Inc. (NASDAQ:VSAT) 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.

ViaSat, Inc. (NASDAQ:VSAT) investors should be aware of a decrease in hedge fund sentiment of late. ViaSat, Inc. (NASDAQ:VSAT) was in 26 hedge funds' portfolios at the end of March. The all time high for this statistic is 30. Our calculations also showed that VSAT isn't among the 30 most popular stocks among hedge funds (click for Q1 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 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 S&P 500 ETFs by 115 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 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.

Seth Klarman of Baupost Group
Seth Klarman of Baupost Group

Seth Klarman of Baupost Group

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, economists warn of inflation flare up. So, we are checking out this backdoor gold play that has hit peak gains of 718% in a little over a year. We go through lists like the 10 best battery 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. With all of this in mind we're going to check out the key hedge fund action surrounding ViaSat, Inc. (NASDAQ:VSAT).

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

At the end of the first quarter, a total of 26 of the hedge funds tracked by Insider Monkey were long this stock, a change of -4% from the fourth quarter of 2020. On the other hand, there were a total of 21 hedge funds with a bullish position in VSAT a year ago. With hedgies' positions undergoing their usual ebb and flow, there exists an "upper tier" of noteworthy hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).

The largest stake in ViaSat, Inc. (NASDAQ:VSAT) was held by Baupost Group, which reported holding $783 million worth of stock at the end of December. It was followed by FPR Partners with a $280.8 million position. Other investors bullish on the company included Odey Asset Management Group, Two Sigma Advisors, and Mountain Lake Investment Management. In terms of the portfolio weights assigned to each position Odey Asset Management Group allocated the biggest weight to ViaSat, Inc. (NASDAQ:VSAT), around 13.12% of its 13F portfolio. FPR Partners is also relatively very bullish on the stock, dishing out 7.7 percent of its 13F equity portfolio to VSAT.

Because ViaSat, Inc. (NASDAQ:VSAT) has faced falling interest from the entirety of the hedge funds we track, logic holds that there lies a certain "tier" of hedgies who sold off their full holdings in the first quarter. Interestingly, Jeffrey Bronchick's Cove Street Capital sold off the largest stake of the "upper crust" of funds monitored by Insider Monkey, valued at close to $35.8 million in stock, and Steve Cohen's Point72 Asset Management was right behind this move, as the fund cut about $1.7 million worth. These bearish behaviors are interesting, as total hedge fund interest fell by 1 funds in the first quarter.

Let's go over hedge fund activity in other stocks similar to ViaSat, Inc. (NASDAQ:VSAT). These stocks are International Game Technology PLC (NYSE:IGT), HB Fuller Co (NYSE:FUL), National Health Investors Inc (NYSE:NHI), Installed Building Products Inc (NYSE:IBP), GATX Corporation (NYSE:GATX), HMS Holdings Corp. (NASDAQ:HMSY), and Cogent Communications Holdings Inc. (NASDAQ:CCOI). All of these stocks' market caps resemble VSAT's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position IGT,37,236926,12 FUL,16,177537,-2 NHI,11,30136,-2 IBP,21,95091,0 GATX,16,203739,4 HMSY,20,628574,-6 CCOI,18,319894,-5 Average,19.9,241700,0.1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 19.9 hedge funds with bullish positions and the average amount invested in these stocks was $242 million. That figure was $1183 million in VSAT's case. International Game Technology PLC (NYSE:IGT) is the most popular stock in this table. On the other hand National Health Investors Inc (NYSE:NHI) is the least popular one with only 11 bullish hedge fund positions. ViaSat, Inc. (NASDAQ:VSAT) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for VSAT is 58.8. 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. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through July 9th and beat the market again by 6.7 percentage points. Unfortunately VSAT wasn't nearly as popular as these 5 stocks and hedge funds that were betting on VSAT were disappointed as the stock returned 5.1% since the end of March (through 7/9) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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