Vertiv Holdings Co (VRT): Hedge Funds In Wait-and-See Mode

·5 min read

In this article you are going to find out whether hedge funds think Vertiv Holdings Co (NYSE:VRT) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It's not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Hedge fund interest in Vertiv Holdings Co (NYSE:VRT) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that VRT isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings). The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as Knight-Swift Transportation Holdings Inc. (NYSE:KNX), Hyatt Hotels Corporation (NYSE:H), and IPG Photonics Corporation (NASDAQ:IPGP) to gather more data points.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so 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. With all of this in mind let's view the new hedge fund action surrounding Vertiv Holdings Co (NYSE:VRT).


Steven Cohen of Point72 Asset Management

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

At Q3's end, a total of 36 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. By comparison, 51 hedge funds held shares or bullish call options in VRT a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Brahman Capital held the most valuable stake in Vertiv Holdings Co (NYSE:VRT), which was worth $137.3 million at the end of the third quarter. On the second spot was Senator Investment Group which amassed $109.5 million worth of shares. Arrowstreet Capital, Locust Wood Capital Advisers, and Impax 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 SAYA Management allocated the biggest weight to Vertiv Holdings Co (NYSE:VRT), around 10.6% of its 13F portfolio. Brahman Capital is also relatively very bullish on the stock, earmarking 10.05 percent of its 13F equity portfolio to VRT.

Judging by the fact that Vertiv Holdings Co (NYSE:VRT) has experienced declining sentiment from hedge fund managers, it's safe to say that there was a specific group of hedgies that elected to cut their positions entirely in the third quarter. Interestingly, Mark Kingdon's Kingdon Capital dropped the biggest stake of the 750 funds followed by Insider Monkey, worth an estimated $18.3 million in stock. Simon Sadler's fund, Segantii Capital, also cut its stock, about $12 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let's go over hedge fund activity in other stocks similar to Vertiv Holdings Co (NYSE:VRT). These stocks are Knight-Swift Transportation Holdings Inc. (NYSE:KNX), Hyatt Hotels Corporation (NYSE:H), IPG Photonics Corporation (NASDAQ:IPGP), DXC Technology Company (NYSE:DXC), Bright Horizons Family Solutions Inc (NYSE:BFAM), Gerdau SA (NYSE:GGB), and Aramark (NYSE:ARMK). This group of stocks' market values resemble VRT's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position KNX,21,261747,-5 H,37,1003042,14 IPGP,25,435718,2 DXC,33,644520,3 BFAM,21,96786,4 GGB,13,220161,-4 ARMK,29,1149672,-7 Average,25.6,544521,1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 25.6 hedge funds with bullish positions and the average amount invested in these stocks was $545 million. That figure was $811 million in VRT's case. Hyatt Hotels Corporation (NYSE:H) is the most popular stock in this table. On the other hand Gerdau SA (NYSE:GGB) is the least popular one with only 13 bullish hedge fund positions. Vertiv Holdings Co (NYSE:VRT) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for VRT is 74.1. 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 28.6% in 2021 through November 30th and still beat the market by 5.6 percentage points. Hedge funds were also right about betting on VRT, though not to the same extent, as the stock returned 6.5% since Q3 (through November 30th) and outperformed the market as well.

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

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