Was The Smart Money Right About Verisign, Inc. (VRSN)?
At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Verisign, Inc. (NASDAQ:VRSN).
Is Verisign, Inc. (NASDAQ:VRSN) the right pick for your portfolio? The smart money was in an optimistic mood. The number of bullish hedge fund bets rose by 6 recently. Verisign, Inc. (NASDAQ:VRSN) was in 47 hedge funds' portfolios at the end of the second quarter of 2020. The all time high for this statistics is 41. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that VRSN 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 41 hedge funds in our database with VRSN 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.
Michael Gelband of ExodusPoint Capital
At Insider Monkey we scour multiple sources to uncover the next great investment idea. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than quadrupled this year. We are trying to identify other EV revolution winners, so we are checking out this under-the-radar lithium stock. We go through lists like the 10 best artificial intelligence stocks to pick the best growth 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. Keeping this in mind let's review the recent hedge fund action surrounding Verisign, Inc. (NASDAQ:VRSN).
What have hedge funds been doing with Verisign, Inc. (NASDAQ:VRSN)?
Heading into the third quarter of 2020, a total of 47 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 15% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards VRSN over the last 20 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Berkshire Hathaway was the largest shareholder of Verisign, Inc. (NASDAQ:VRSN), with a stake worth $2650.7 million reported as of the end of September. Trailing Berkshire Hathaway was Renaissance Technologies, which amassed a stake valued at $1512.1 million. D E Shaw, Cantillon Capital Management, and Palestra Capital 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 Atalan Capital allocated the biggest weight to Verisign, Inc. (NASDAQ:VRSN), around 10.93% of its 13F portfolio. Highside Global Management is also relatively very bullish on the stock, designating 10.03 percent of its 13F equity portfolio to VRSN.
Now, key hedge funds have jumped into Verisign, Inc. (NASDAQ:VRSN) headfirst. Palestra Capital Management, managed by Andrew Immerman and Jeremy Schiffman, assembled the biggest position in Verisign, Inc. (NASDAQ:VRSN). Palestra Capital Management had $163.9 million invested in the company at the end of the quarter. Steve Cohen's Point72 Asset Management also initiated a $9.4 million position during the quarter. The following funds were also among the new VRSN investors: Ryan Tolkin (CIO)'s Schonfeld Strategic Advisors, Michael Gelband's ExodusPoint Capital, and Anthony S. Daffer's Provenire Capital.
Let's check out hedge fund activity in other stocks similar to Verisign, Inc. (NASDAQ:VRSN). We will take a look at Moderna, Inc. (NASDAQ:MRNA), Motorola Solutions Inc (NYSE:MSI), V.F. Corporation (NYSE:VFC), Parker-Hannifin Corporation (NYSE:PH), Twitter Inc (NYSE:TWTR), Marvell Technology Group Ltd. (NASDAQ:MRVL), and American Water Works Company, Inc. (NYSE:AWK). All of these stocks' market caps resemble VRSN's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MRNA,37,788433,12 MSI,36,535822,2 VFC,27,558958,8 PH,39,1172205,7 TWTR,68,1278023,13 MRVL,41,664690,12 AWK,30,653000,0 Average,39.7,807304,7.7 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 39.7 hedge funds with bullish positions and the average amount invested in these stocks was $807 million. That figure was $6246 million in VRSN's case. Twitter Inc (NYSE:TWTR) is the most popular stock in this table. On the other hand V.F. Corporation (NYSE:VFC) is the least popular one with only 27 bullish hedge fund positions. Verisign, Inc. (NASDAQ:VRSN) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for VRSN is 64.4. 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 positive signal but 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 30% in 2020 through October 23rd and beat the market by 21 percentage points. Unfortunately VRSN wasn't nearly as popular as these 10 stocks and hedge funds that were betting on VRSN were disappointed as the stock returned -2.9% since the end of June (through 10/23) 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 many of these stocks already outperformed the market so far this year.
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Disclosure: None. This article was originally published at Insider Monkey.
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