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Were Hedge Funds Wrong About Verisk Analytics, Inc. (VRSK)?

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Is Verisk Analytics, Inc. (NASDAQ:VRSK) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.

Is Verisk Analytics, Inc. (NASDAQ:VRSK) ready to rally soon? Money managers were buying. The number of long hedge fund positions improved by 5 in recent months. Verisk Analytics, Inc. (NASDAQ:VRSK) was in 36 hedge funds' portfolios at the end of the second quarter of 2020. The all time high for this statistics is 34. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that VRSK isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). There were 31 hedge funds in our database with VRSK holdings at the end of March.

Video: Watch our video about the top 5 most popular hedge fund stocks.

Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 56 percentage points since March 2017 (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 34% through August 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Ryan Tolkin, CIO of Schonfeld Strategic Advisors

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 most profitable companies in the world 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 to get excerpts of these letters in your inbox. Now we're going to analyze the key hedge fund action encompassing Verisk Analytics, Inc. (NASDAQ:VRSK).

What does smart money think about Verisk Analytics, Inc. (NASDAQ:VRSK)?

At the end of June, a total of 36 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 16% from the first quarter of 2020. On the other hand, there were a total of 30 hedge funds with a bullish position in VRSK a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, Charles Akre's Akre Capital Management has the number one position in Verisk Analytics, Inc. (NASDAQ:VRSK), worth close to $416.7 million, comprising 3.1% of its total 13F portfolio. The second most bullish fund manager is Ako Capital, managed by Nicolai Tangen, which holds a $160.9 million position; 2.8% of its 13F portfolio is allocated to the company. Remaining peers that are bullish include Ian Simm's Impax Asset Management, Greg Poole's Echo Street Capital Management and D. E. Shaw's D E Shaw. In terms of the portfolio weights assigned to each position Akre Capital Management allocated the biggest weight to Verisk Analytics, Inc. (NASDAQ:VRSK), around 3.14% of its 13F portfolio. Ako Capital is also relatively very bullish on the stock, setting aside 2.81 percent of its 13F equity portfolio to VRSK.

As aggregate interest increased, key hedge funds were leading the bulls' herd. Impax Asset Management, managed by Ian Simm, assembled the biggest position in Verisk Analytics, Inc. (NASDAQ:VRSK). Impax Asset Management had $100.2 million invested in the company at the end of the quarter. Renaissance Technologies also initiated a $4.7 million position during the quarter. The other funds with brand new VRSK positions are David Rodriguez-Fraile's BlueMar Capital Management, Ryan Tolkin (CIO)'s Schonfeld Strategic Advisors, and Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital.

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Verisk Analytics, Inc. (NASDAQ:VRSK) but similarly valued. These stocks are IAC/InterActiveCorp (NASDAQ:IAC), Agilent Technologies Inc. (NYSE:A), Paychex, Inc. (NASDAQ:PAYX), IQVIA Holdings, Inc. (NYSE:IQV), The Hershey Company (NYSE:HSY), CRH PLC (NYSE:CRH), and ING Groep N.V. (NYSE:ING). This group of stocks' market caps are closest to VRSK's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position IAC,60,4955863,3 A,38,2815048,3 PAYX,36,877442,-5 IQV,66,3022562,6 HSY,39,1028323,6 CRH,7,76935,-3 ING,13,385807,0 Average,37,1880283,1.4 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 37 hedge funds with bullish positions and the average amount invested in these stocks was $1880 million. That figure was $982 million in VRSK's case. IQVIA Holdings, Inc. (NYSE:IQV) is the most popular stock in this table. On the other hand CRH PLC (NYSE:CRH) is the least popular one with only 7 bullish hedge fund positions. Verisk Analytics, Inc. (NASDAQ:VRSK) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for VRSK is 64.6. 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. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 23% in 2020 through October 30th and surpassed the market again by 20.1 percentage points. Unfortunately VRSK wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); VRSK investors were disappointed as the stock returned 4.7% since the end of June (through 10/30) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 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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