We can judge whether Visteon Corp (NASDAQ:VC) 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 when we factor in known risk factors.
Visteon Corp (NASDAQ:VC) investors should pay attention to an increase in support from the world's most elite money managers recently. Our calculations also showed that VC 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.
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 Russell 2000 ETFs by 40 percentage points since May 2014 (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 stocks that are in our short portfolio.
[caption id="attachment_338182" align="aligncenter" width="500"] Harold Levy of Iridian Asset 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 review the key hedge fund action surrounding Visteon Corp (NASDAQ:VC).
How are hedge funds trading Visteon Corp (NASDAQ:VC)?
At the end of the third quarter, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a change of 18% from the previous quarter. On the other hand, there were a total of 22 hedge funds with a bullish position in VC a year ago. With hedge funds' sentiment swirling, there exists a select group of notable hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Iridian Asset Management, managed by David Cohen and Harold Levy, holds the most valuable position in Visteon Corp (NASDAQ:VC). Iridian Asset Management has a $146.8 million position in the stock, comprising 2.3% of its 13F portfolio. The second most bullish fund manager is Citadel Investment Group, led by Ken Griffin, holding a $76.8 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other peers with similar optimism contain Douglas T. Granat's Trigran Investments, Israel Englander's Millennium Management and Gregg J. Powers's Private Capital Management. In terms of the portfolio weights assigned to each position Trigran Investments allocated the biggest weight to Visteon Corp (NASDAQ:VC), around 8.08% of its 13F portfolio. Albar Capital is also relatively very bullish on the stock, dishing out 4.67 percent of its 13F equity portfolio to VC.
As industrywide interest jumped, key money managers were breaking ground themselves. Point72 Asset Management, managed by Steve Cohen, assembled the most outsized position in Visteon Corp (NASDAQ:VC). Point72 Asset Management had $21.6 million invested in the company at the end of the quarter. Christopher James's Partner Fund Management also initiated a $12.3 million position during the quarter. The other funds with new positions in the stock are Dmitry Balyasny's Balyasny Asset Management, Richard Driehaus's Driehaus Capital, and Phill Gross and Robert Atchinson's Adage Capital Management.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Visteon Corp (NASDAQ:VC) but similarly valued. We will take a look at Glaukos Corporation (NYSE:GKOS), LCI Industries (NYSE:LCII), Beacon Roofing Supply, Inc. (NASDAQ:BECN), and Natera Inc (NASDAQ:NTRA). This group of stocks' market valuations are similar to VC's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GKOS,11,69877,-4 LCII,14,98568,4 BECN,21,331266,5 NTRA,22,270162,2 Average,17,192468,1.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $192 million. That figure was $417 million in VC's case. Natera Inc (NASDAQ:NTRA) is the most popular stock in this table. On the other hand Glaukos Corporation (NYSE:GKOS) is the least popular one with only 11 bullish hedge fund positions. Visteon Corp (NASDAQ:VC) is not the most popular stock in this group but hedge fund interest is still above average. 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. Hedge funds were also right about betting on VC as the stock returned 13.3% during the fourth quarter (through the end of November) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.