Hedge Funds Aren’t Crazy About Vonage Holdings Corp. (VG) Anymore

·5 min read

Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 900 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds' 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about Vonage Holdings Corp. (NASDAQ:VG) in this article.

Is Vonage Holdings Corp. (NASDAQ:VG) a buy, sell, or hold? Hedge funds were selling. The number of bullish hedge fund positions decreased by 7 in recent months. Vonage Holdings Corp. (NASDAQ:VG) was in 29 hedge funds' portfolios at the end of June. The all time high for this statistic is 39. Our calculations also showed that VG isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 36 hedge funds in our database with VG holdings at the end of March.

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 79 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.

Wil Harkey Nantahala Capital
Wil Harkey Nantahala Capital

Wil Harkey of Nantahala Capital Management

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 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 key hedge fund action regarding Vonage Holdings Corp. (NASDAQ:VG).

Do Hedge Funds Think VG Is A Good Stock To Buy Now?

Heading into the third quarter of 2021, a total of 29 of the hedge funds tracked by Insider Monkey were long this stock, a change of -19% from the first quarter of 2020. Below, you can check out the change in hedge fund sentiment towards VG over the last 24 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 upping their holdings significantly (or already accumulated large positions).

More specifically, JANA Partners was the largest shareholder of Vonage Holdings Corp. (NASDAQ:VG), with a stake worth $141.7 million reported as of the end of June. Trailing JANA Partners was Park West Asset Management, which amassed a stake valued at $138.4 million. Legion Partners Asset Management, Nantahala Capital Management, and Empyrean Capital Partners 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 Legion Partners Asset Management allocated the biggest weight to Vonage Holdings Corp. (NASDAQ:VG), around 16.11% of its 13F portfolio. JANA Partners is also relatively very bullish on the stock, dishing out 11.7 percent of its 13F equity portfolio to VG.

Seeing as Vonage Holdings Corp. (NASDAQ:VG) has faced bearish sentiment from the entirety of the hedge funds we track, it's safe to say that there lies a certain "tier" of hedge funds that elected to cut their positions entirely heading into Q3. At the top of the heap, David MacKnight's One Fin Capital Management sold off the largest investment of the 750 funds monitored by Insider Monkey, totaling close to $8 million in stock, and Brandon Osten's Venator Capital Management was right behind this move, as the fund cut about $1.3 million worth. These transactions are important to note, as aggregate hedge fund interest fell by 7 funds heading into Q3.

Let's check out hedge fund activity in other stocks similar to Vonage Holdings Corp. (NASDAQ:VG). We will take a look at Steven Madden, Ltd. (NASDAQ:SHOO), Merit Medical Systems, Inc. (NASDAQ:MMSI), AtriCure Inc. (NASDAQ:ATRC), INMODE LTD. (NASDAQ:INMD), ViaSat, Inc. (NASDAQ:VSAT), Riot Blockchain, Inc (NASDAQ:RIOT), and Poshmark, Inc. (NASDAQ:POSH). This group of stocks' market valuations match VG's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SHOO,18,157045,-1 MMSI,22,389076,4 ATRC,21,242542,7 INMD,26,298204,3 VSAT,22,1260800,-4 RIOT,17,100716,5 POSH,15,57334,1 Average,20.1,357960,2.1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 20.1 hedge funds with bullish positions and the average amount invested in these stocks was $358 million. That figure was $708 million in VG's case. INMODE LTD. (NASDAQ:INMD) is the most popular stock in this table. On the other hand Poshmark, Inc. (NASDAQ:POSH) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks Vonage Holdings Corp. (NASDAQ:VG) is more popular among hedge funds. Our overall hedge fund sentiment score for VG is 70.3. 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 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 returned 24.9% in 2021 through October 15th but still managed to beat the market by 4.5 percentage points. Hedge funds were also right about betting on VG as the stock returned 12.4% since the end of June (through 10/15) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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

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