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Were Hedge Funds Right About Flocking Into ViaSat, Inc. (VSAT)?

Nina Todic

It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. The Standard and Poor’s 500 Index returned approximately 13.1% in the first 2.5 months of this year (including dividend payments). Conversely, hedge funds’ top 15 large-cap stock picks generated a return of 19.7% during the same 2.5-month period, with 93% of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds' stock picks generate superior risk-adjusted returns. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like ViaSat, Inc. (NASDAQ:VSAT).

Is ViaSat, Inc. (NASDAQ:VSAT) going to take off soon? Prominent investors are in an optimistic mood. The number of bullish hedge fund positions rose by 1 lately. Our calculations also showed that vsat isn't among the 30 most popular stocks among hedge funds.

According to most stock holders, hedge funds are viewed as underperforming, old investment vehicles of years past. While there are over 8000 funds in operation at present, Our researchers choose to focus on the elite of this group, about 750 funds. These hedge fund managers have their hands on most of all hedge funds' total asset base, and by following their matchless investments, Insider Monkey has identified numerous investment strategies that have historically outstripped Mr. Market. Insider Monkey's flagship hedge fund strategy outrun the S&P 500 index by nearly 5 percentage points annually since its inception in May 2014 through early November 2018. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 27.5% since February 2017 (through March 12th) even though the market was up nearly 25% during the same period. We just shared a list of 6 short targets in our latest quarterly update and they are already down an average of 6% in less than a month.

BAUPOST GROUP Seth Klarman

We're going to analyze the latest hedge fund action regarding ViaSat, Inc. (NASDAQ:VSAT).

What does the smart money think about ViaSat, Inc. (NASDAQ:VSAT)?

At the end of the fourth quarter, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 6% from the second quarter of 2018. On the other hand, there were a total of 14 hedge funds with a bullish position in VSAT a year ago. With hedge funds' positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were upping their holdings substantially (or already accumulated large positions).

No of Hedge Funds With VSAT Positions

The largest stake in ViaSat, Inc. (NASDAQ:VSAT) was held by Baupost Group, which reported holding $809.5 million worth of stock at the end of September. It was followed by FPR Partners with a $357.1 million position. Other investors bullish on the company included Southeastern Asset Management, Odey Asset Management Group, and Cove Street Capital.

With a general bullishness amongst the heavyweights, key money managers were breaking ground themselves. SG Capital Management, managed by Ken Grossman and Glen Schneider, established the most outsized position in ViaSat, Inc. (NASDAQ:VSAT). SG Capital Management had $15.8 million invested in the company at the end of the quarter. Matthew Hulsizer's PEAK6 Capital Management also made a $0.3 million investment in the stock during the quarter. The only other fund with a new position in the stock is Paul Marshall and Ian Wace's Marshall Wace LLP.

Let's now review hedge fund activity in other stocks similar to ViaSat, Inc. (NASDAQ:VSAT). These stocks are Ingevity Corporation (NYSE:NGVT), Umpqua Holdings Corp (NASDAQ:UMPQ), Wyndham Destinations, Inc. (NYSE:WYND), and Peabody Energy Corporation (NYSE:BTU). This group of stocks' market valuations resemble VSAT's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NGVT,17,123490,-2 UMPQ,20,283820,0 WYND,20,473616,-2 BTU,31,1750663,-3 Average,22,657897,-1.75 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 22 hedge funds with bullish positions and the average amount invested in these stocks was $658 million. That figure was $1763 million in VSAT's case. Peabody Energy Corporation (NYSE:BTU) is the most popular stock in this table. On the other hand Ingevity Corporation (NYSE:NGVT) is the least popular one with only 17 bullish hedge fund positions. ViaSat, Inc. (NASDAQ:VSAT) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. A small number of hedge funds were also right about betting on VSAT as the stock returned 50.3% and outperformed the market by an even larger margin.

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

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