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Is VSTA A Good Stock To Buy Now?

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·6 min read
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Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 817 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds' 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about Vasta Platform Limited (NASDAQ:VSTA) in this article.

Is VSTA a good stock to buy now? Prominent investors were turning bullish. The number of bullish hedge fund bets moved up by 8 recently. Vasta Platform Limited (NASDAQ:VSTA) was in 8 hedge funds' portfolios at the end of September. Our calculations also showed that VSTA 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 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 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Ken Griffin CITADEL INVESTMENT GROUP
Ken Griffin CITADEL INVESTMENT GROUP

Ken Griffin of Citadel Investment Group

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 5 best cheap stocks to buy according to Ray Dalio to identify stocks with upside potential. 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 go over the latest hedge fund action regarding Vasta Platform Limited (NASDAQ:VSTA).

What does smart money think about Vasta Platform Limited (NASDAQ:VSTA)?

At Q3's end, a total of 8 of the hedge funds tracked by Insider Monkey were long this stock, a change of 8 from one quarter earlier. The graph below displays the number of hedge funds with bullish position in VSTA over the last 21 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, SCGE Management held the most valuable stake in Vasta Platform Limited (NASDAQ:VSTA), which was worth $15.4 million at the end of the third quarter. On the second spot was Millennium Management which amassed $7.4 million worth of shares. Citadel Investment Group, Alyeska Investment Group, and Hound Partners 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 Hound Partners allocated the biggest weight to Vasta Platform Limited (NASDAQ:VSTA), around 0.33% of its 13F portfolio. SCGE Management is also relatively very bullish on the stock, dishing out 0.24 percent of its 13F equity portfolio to VSTA.

Now, specific money managers were breaking ground themselves. SCGE Management, managed by Christopher Lyle, assembled the largest position in Vasta Platform Limited (NASDAQ:VSTA). SCGE Management had $15.4 million invested in the company at the end of the quarter. Israel Englander's Millennium Management also initiated a $7.4 million position during the quarter. The following funds were also among the new VSTA investors: Ken Griffin's Citadel Investment Group, Anand Parekh's Alyeska Investment Group, and Jonathan Auerbach's Hound Partners.

Let's also examine hedge fund activity in other stocks similar to Vasta Platform Limited (NASDAQ:VSTA). These stocks are Holly Energy Partners, L.P. (NYSE:HEP), Hailiang Education Group Inc. (NASDAQ:HLG), Columbia Financial, Inc. (NASDAQ:CLBK), Aphria Inc. (NASDAQ:APHA), Renasant Corporation (NASDAQ:RNST), Mersana Therapeutics, Inc. (NASDAQ:MRSN), and Beam Therapeutics Inc. (NASDAQ:BEAM). All of these stocks' market caps resemble VSTA's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HEP,2,1314,0 HLG,1,6144,-1 CLBK,13,33885,3 APHA,8,11235,-1 RNST,9,19980,-1 MRSN,28,445697,3 BEAM,7,193738,-3 Average,9.7,101713,0 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 9.7 hedge funds with bullish positions and the average amount invested in these stocks was $102 million. That figure was $41 million in VSTA's case. Mersana Therapeutics, Inc. (NASDAQ:MRSN) is the most popular stock in this table. On the other hand Hailiang Education Group Inc. (NASDAQ:HLG) is the least popular one with only 1 bullish hedge fund positions. Vasta Platform Limited (NASDAQ:VSTA) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for VSTA is 30.7. 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 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 31.6% in 2020 through December 2nd and surpassed the market again by 16 percentage points. Unfortunately VSTA wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); VSTA investors were disappointed as the stock returned -6.5% since the end of September (through 12/2) 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.

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