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Were Hedge Funds Right About Warming Up To Vereit Inc (VER)?

Reymerlyn Martin

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We have processed the filings of the more than 700 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their June 28 holdings, data that is available nowhere else. Should you consider Vereit Inc (NYSE:VER) for your portfolio? We'll look to this invaluable collective wisdom for the answer.

Is Vereit Inc (NYSE:VER) a buy here? Money managers are getting more optimistic. The number of bullish hedge fund bets advanced by 2 lately. Our calculations also showed that VER isn't among the 30 most popular stocks among hedge funds (see the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Ricky Sandler, Eminence Capital

Unlike this former hedge fund manager who is convinced Dow will soar past 40000, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We're going to take a gander at the new hedge fund action encompassing Vereit Inc (NYSE:VER).

How are hedge funds trading Vereit Inc (NYSE:VER)?

At the end of the second quarter, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 10% from one quarter earlier. On the other hand, there were a total of 25 hedge funds with a bullish position in VER a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

VER_oct2019

Among these funds, Eminence Capital held the most valuable stake in Vereit Inc (NYSE:VER), which was worth $97.3 million at the end of the second quarter. On the second spot was Redwood Capital Management which amassed $83.8 million worth of shares. Moreover, Glendon Capital Management, Renaissance Technologies, and Citadel Investment Group were also bullish on Vereit Inc (NYSE:VER), allocating a large percentage of their portfolios to this stock.

As one would reasonably expect, key hedge funds were breaking ground themselves. Waterfront Capital Partners, managed by Eduardo Abush, established the biggest position in Vereit Inc (NYSE:VER). Waterfront Capital Partners had $8.9 million invested in the company at the end of the quarter. Matthew Tewksbury's Stevens Capital Management also made a $2.7 million investment in the stock during the quarter. The other funds with new positions in the stock are Israel Englander's Millennium Management, Mike Vranos's Ellington, and Ronald Hua's Qtron Investments.

Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Vereit Inc (NYSE:VER) but similarly valued. These stocks are Tapestry, Inc. (NYSE:TPR), Advanced Semiconductor Engineering (NYSE:ASX), Coty Inc (NYSE:COTY), and Grupo Aval Acciones y Valores S.A. (NYSE:AVAL). This group of stocks' market values are similar to VER's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TPR,32,533042,3 ASX,8,184028,-1 COTY,19,149821,-5 AVAL,7,19032,-1 Average,16.5,221481,-1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.5 hedge funds with bullish positions and the average amount invested in these stocks was $221 million. That figure was $386 million in VER's case. Tapestry, Inc. (NYSE:TPR) is the most popular stock in this table. On the other hand Grupo Aval Acciones y Valores S.A. (NYSE:AVAL) is the least popular one with only 7 bullish hedge fund positions. Vereit Inc (NYSE:VER) 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Hedge funds were also right about betting on VER as the stock returned 10.1% during the third quarter and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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

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