At Insider Monkey, we pore over the filings of nearly 817 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we've gathered as a result gives us access to a wealth of collective knowledge based on these firms' portfolio holdings as of September 30. In this article, we will use that wealth of knowledge to determine whether or not Veritiv Corp (NYSE:VRTV) makes for a good investment right now.
Is VRTV a good stock to buy now? Hedge funds were becoming more confident. The number of long hedge fund positions went up by 1 in recent months. Veritiv Corp (NYSE:VRTV) was in 11 hedge funds' portfolios at the end of September. The all time high for this statistics is 20. Our calculations also showed that VRTV isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).
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 has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 66 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
BAUPOST GROUP Seth Klarman
Seth Klarman of Baupost Group
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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. Now we're going to take a look at the fresh hedge fund action encompassing Veritiv Corp (NYSE:VRTV).
Do Hedge Funds Think VRTV Is A Good Stock To Buy Now?
At the end of September, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of 10% from the previous quarter. The graph below displays the number of hedge funds with bullish position in VRTV over the last 21 quarters. With the smart money's capital changing hands, there exists a select group of notable hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Baupost Group, managed by Seth Klarman, holds the biggest position in Veritiv Corp (NYSE:VRTV). Baupost Group has a $45.1 million position in the stock, comprising 0.5% of its 13F portfolio. Coming in second is Renaissance Technologies, which holds a $2.3 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other peers that are bullish consist of Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital, Cliff Asness's AQR Capital Management and John Overdeck and David Siegel's Two Sigma Advisors. In terms of the portfolio weights assigned to each position Baupost Group allocated the biggest weight to Veritiv Corp (NYSE:VRTV), around 0.49% of its 13F portfolio. Tudor Investment Corp is also relatively very bullish on the stock, dishing out 0.01 percent of its 13F equity portfolio to VRTV.
Now, key hedge funds have been driving this bullishness. ExodusPoint Capital, managed by Michael Gelband, assembled the most outsized position in Veritiv Corp (NYSE:VRTV). ExodusPoint Capital had $0.2 million invested in the company at the end of the quarter. Gavin Saitowitz and Cisco J. del Valle's Prelude Capital (previously Springbok Capital) also made a $0 million investment in the stock during the quarter.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Veritiv Corp (NYSE:VRTV) but similarly valued. We will take a look at WhiteHorse Finance, Inc. (NASDAQ:WHF), VIA optronics AG (NYSE:VIAO), Civista Bancshares, Inc. (NASDAQ:CIVB), Alpha Pro Tech, Ltd. (NYSE:APT), AquaBounty Technologies, Inc. (NASDAQ:AQB), ESSA Pharma Inc. (NASDAQ:EPIX), and Verrica Pharmaceuticals Inc. (NASDAQ:VRCA). All of these stocks' market caps are closest to VRTV's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WHF,3,1895,0 VIAO,10,8592,10 CIVB,11,7096,-1 APT,6,24429,-2 AQB,4,1751,0 EPIX,16,72217,9 VRCA,4,41016,1 Average,7.7,22428,2.4 [/table]
As you can see these stocks had an average of 7.7 hedge funds with bullish positions and the average amount invested in these stocks was $22 million. That figure was $53 million in VRTV's case. ESSA Pharma Inc. (NASDAQ:EPIX) is the most popular stock in this table. On the other hand WhiteHorse Finance, Inc. (NASDAQ:WHF) is the least popular one with only 3 bullish hedge fund positions. Veritiv Corp (NYSE:VRTV) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for VRTV is 53.3. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. Hedge funds were also right about betting on VRTV as the stock returned 54.7% since the end of Q3 (through 12/8) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.
