How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don't always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Virtus Investment Partners Inc (NASDAQ:VRTS).
Virtus Investment Partners Inc (NASDAQ:VRTS) shares haven't seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 20 hedge funds' portfolios at the end of March. Our calculations also showed that VRTS isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings). At the end of this article we will also compare VRTS to other stocks including Ping Identity Holding Corp. (NYSE:PING), BGC Partners, Inc. (NASDAQ:BGCP), and Lakeland Financial Corporation (NASDAQ:LKFN) to get a better sense of its popularity.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Donald Sussman of Paloma Partners
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 15 best Jim Cramer stocks to identify the next Tesla that will deliver outsized returns. 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 homepage. Keeping this in mind we're going to analyze the new hedge fund action encompassing Virtus Investment Partners Inc (NASDAQ:VRTS).
Do Hedge Funds Think VRTS Is A Good Stock To Buy Now?
At first quarter's end, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in VRTS over the last 23 quarters. With the smart money's positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
Among these funds, Schonfeld Strategic Advisors held the most valuable stake in Virtus Investment Partners Inc (NASDAQ:VRTS), which was worth $40.7 million at the end of the fourth quarter. On the second spot was Millennium Management which amassed $39 million worth of shares. Newtyn Management, AWH Capital, and Balyasny Asset Management 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 AWH Capital allocated the biggest weight to Virtus Investment Partners Inc (NASDAQ:VRTS), around 10.58% of its 13F portfolio. Newtyn Management is also relatively very bullish on the stock, designating 3.18 percent of its 13F equity portfolio to VRTS.
Judging by the fact that Virtus Investment Partners Inc (NASDAQ:VRTS) has witnessed declining sentiment from the entirety of the hedge funds we track, we can see that there was a specific group of money managers that slashed their full holdings by the end of the first quarter. Intriguingly, Usman Waheed's Strycker View Capital sold off the biggest investment of all the hedgies watched by Insider Monkey, worth close to $2.9 million in stock, and Renaissance Technologies was right behind this move, as the fund dropped about $1.6 million worth. These bearish behaviors are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Virtus Investment Partners Inc (NASDAQ:VRTS) but similarly valued. We will take a look at Ping Identity Holding Corp. (NYSE:PING), BGC Partners, Inc. (NASDAQ:BGCP), Lakeland Financial Corporation (NASDAQ:LKFN), Zentalis Pharmaceuticals, Inc. (NASDAQ:ZNTL), Lions Gate Entertainment Corporation (NYSE:LGF-B), Primoris Services Corp (NASDAQ:PRIM), and Callon Petroleum Company (NYSE:CPE). This group of stocks' market valuations resemble VRTS's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PING,11,873908,-5 BGCP,21,305412,-3 LKFN,9,15719,2 ZNTL,16,580041,-1 LGF-B,27,356880,4 PRIM,28,163697,11 CPE,16,94442,9 Average,18.3,341443,2.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.3 hedge funds with bullish positions and the average amount invested in these stocks was $341 million. That figure was $144 million in VRTS's case. Primoris Services Corp (NASDAQ:PRIM) is the most popular stock in this table. On the other hand Lakeland Financial Corporation (NASDAQ:LKFN) is the least popular one with only 9 bullish hedge fund positions. Virtus Investment Partners Inc (NASDAQ:VRTS) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for VRTS is 63.9. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 23.8% in 2021 through July 16th and still beat the market by 7.7 percentage points. Hedge funds were also right about betting on VRTS, though not to the same extent, as the stock returned 11.5% since Q1 (through July 16th) and outperformed the market as well.
Get real-time email alerts: Follow Virtus Investment Partners Inc. (NASDAQ:VRTS)
Disclosure: None. This article was originally published at Insider Monkey.