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Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that's why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can't match. So should one consider investing in Vistra Corp. (NYSE:VST)? The smart money sentiment can provide an answer to this question.
Is VST a good stock to buy now? Vistra Corp. (NYSE:VST) shareholders have witnessed an increase in support from the world's most elite money managers recently. Vistra Corp. (NYSE:VST) was in 45 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistic is 49. There were 42 hedge funds in our database with VST holdings at the end of June. Our calculations also showed that VST isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
In the eyes of most shareholders, hedge funds are perceived as slow, outdated financial tools of yesteryear. While there are more than 8000 funds trading at present, Our researchers choose to focus on the leaders of this club, about 850 funds. It is estimated that this group of investors oversee most of the smart money's total capital, and by monitoring their highest performing equity investments, Insider Monkey has formulated a few investment strategies that have historically outpaced the broader indices. Insider Monkey's flagship short hedge fund strategy exceeded the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 13% since February 2017 (through November 17th) even though the market was up 65% during the same period. We just shared a list of 6 short targets in our latest quarterly update .
Marc Lasry of Avenue Capital
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy to pick the best large-cap stocks to buy. 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 website. Keeping this in mind let's take a glance at the fresh hedge fund action regarding Vistra Corp. (NYSE:VST).
Do Hedge Funds Think VST Is A Good Stock To Buy Now?
At third quarter's end, a total of 45 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 7% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards VST over the last 21 quarters. With the smart money's capital changing hands, there exists a few notable hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).
Among these funds, Oaktree Capital Management held the most valuable stake in Vistra Corp. (NYSE:VST), which was worth $571 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $128.2 million worth of shares. Avenue Capital, GoldenTree Asset Management, and Angelo Gordon & Co 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 Avenue Capital allocated the biggest weight to Vistra Corp. (NYSE:VST), around 78.56% of its 13F portfolio. Highland Capital Management is also relatively very bullish on the stock, dishing out 15 percent of its 13F equity portfolio to VST.
As one would reasonably expect, specific money managers were breaking ground themselves. D E Shaw, managed by D. E. Shaw, created the largest position in Vistra Corp. (NYSE:VST). D E Shaw had $14.4 million invested in the company at the end of the quarter. George Baxter's Sabrepoint Capital also initiated a $10.4 million position during the quarter. The other funds with brand new VST positions are Steve Cohen's Point72 Asset Management, Benjamin A. Smith's Laurion Capital Management, and Paul Marshall and Ian Wace's Marshall Wace LLP.
Let's check out hedge fund activity in other stocks similar to Vistra Corp. (NYSE:VST). These stocks are Quidel Corporation (NASDAQ:QDEL), Bright Horizons Family Solutions Inc (NYSE:BFAM), Carnival Corporation & plc (NYSE:CUK), Chegg Inc (NYSE:CHGG), Fidelity National Financial Inc (NYSE:FNF), Allegion plc (NYSE:ALLE), and Universal Health Services, Inc. (NYSE:UHS). This group of stocks' market caps are closest to VST's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position QDEL,42,467265,10 BFAM,26,314357,-4 CUK,13,142847,-1 CHGG,42,838532,-3 FNF,44,1065923,-3 ALLE,32,540945,3 UHS,34,380704,-4 Average,33.3,535796,-0.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 33.3 hedge funds with bullish positions and the average amount invested in these stocks was $536 million. That figure was $1514 million in VST's case. Fidelity National Financial Inc (NYSE:FNF) is the most popular stock in this table. On the other hand Carnival Corporation & plc (NYSE:CUK) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks Vistra Corp. (NYSE:VST) is more popular among hedge funds. Our overall hedge fund sentiment score for VST is 85.6. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. Unfortunately VST wasn't nearly as popular as these 20 stocks and hedge funds that were betting on VST were disappointed as the stock returned 0.5% since the end of the third quarter (through 12/8) 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 most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.