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VMware, Inc. (VMW): Hedge Funds Are Snapping Up

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At Insider Monkey, we pore over the filings of nearly 873 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we've gathered as a result gives us access to a wealth of collective knowledge based on these firms' portfolio holdings as of June 30th. In this article, we will use that wealth of knowledge to determine whether or not VMware, Inc. (NYSE:VMW) makes for a good investment right now.

Is VMware, Inc. (NYSE:VMW) the right investment to pursue these days? Money managers were becoming more confident. The number of bullish hedge fund bets improved by 3 recently. VMware, Inc. (NYSE:VMW) was in 28 hedge funds' portfolios at the end of the second quarter of 2021. The all time high for this statistic is 43. Our calculations also showed that VMW isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 185.4% since March 2017 and outperformed the S&P 500 ETFs by more than 79 percentage points (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Ole Andreas Halvorsen Viking Global
Ole Andreas Halvorsen Viking Global

Ole Andreas Halvorsen of Viking Global

At Insider Monkey, we scour multiple sources to uncover 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 EV 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 let's review the latest hedge fund action encompassing VMware, Inc. (NYSE:VMW).

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

At the end of June, a total of 28 of the hedge funds tracked by Insider Monkey were long this stock, a change of 12% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in VMW over the last 24 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.

Is VMW A Good Stock To Buy?
Is VMW A Good Stock To Buy?

When looking at the institutional investors followed by Insider Monkey, John Overdeck and David Siegel's Two Sigma Advisors has the most valuable position in VMware, Inc. (NYSE:VMW), worth close to $201.2 million, corresponding to 0.5% of its total 13F portfolio. The second most bullish fund manager is Citadel Investment Group, led by Ken Griffin, holding a $156.9 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining peers that hold long positions comprise Jacob Mitchell's Antipodes Partners, and Benjamin A. Smith's Laurion Capital Management. In terms of the portfolio weights assigned to each position Jet Capital Investors allocated the biggest weight to VMware, Inc. (NYSE:VMW), around 8.34% of its 13F portfolio. GMT Capital is also relatively very bullish on the stock, setting aside 3.94 percent of its 13F equity portfolio to VMW.

As industrywide interest jumped, some big names were leading the bulls' herd. Antara Capital, managed by Himanshu Gulati, initiated the biggest call position in VMware, Inc. (NYSE:VMW). Antara Capital had $48 million invested in the company at the end of the quarter. Ray Dalio's Bridgewater Associates also initiated a $29.5 million position during the quarter. The following funds were also among the new VMW investors: Michael Gelband's ExodusPoint Capital, Richard C. Patton's Courage Capital, and Renee Yao's Neo Ivy Capital.

Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as VMware, Inc. (NYSE:VMW) but similarly valued. These stocks are Intercontinental Exchange Inc (NYSE:ICE), Norfolk Southern Corp. (NYSE:NSC), Bank of Montreal (NYSE:BMO), Edwards Lifesciences Corporation (NYSE:EW), Atlassian Corporation Plc (NASDAQ:TEAM), Autodesk, Inc. (NASDAQ:ADSK), and The Southern Company (NYSE:SO). All of these stocks' market caps are closest to VMW's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ICE,47,2946268,-11 NSC,58,1488960,12 BMO,12,133306,-3 EW,47,2043269,11 TEAM,64,4170236,-3 ADSK,64,3201341,-2 SO,37,606405,2 Average,47,2084255,0.9 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 47 hedge funds with bullish positions and the average amount invested in these stocks was $2084 million. That figure was $820 million in VMW's case. Atlassian Corporation Plc (NASDAQ:TEAM) is the most popular stock in this table. On the other hand Bank of Montreal (NYSE:BMO) is the least popular one with only 12 bullish hedge fund positions. VMware, Inc. (NYSE:VMW) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for VMW is 42.9. 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 negative signal and 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 24.9% in 2021 through October 15th and surpassed the market again by 4.5 percentage points. Unfortunately VMW wasn't nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); VMW investors were disappointed as the stock returned -2.2% since the end of June (through 10/15) 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 most of these stocks already outperformed the market in 2021.

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