In this article we are going to use hedge fund sentiment as a tool and determine whether 21Vianet Group Inc (NASDAQ:VNET) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds' picks don't beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Is VNET stock a buy? 21Vianet Group Inc (NASDAQ:VNET) has experienced an increase in enthusiasm from smart money in recent months. 21Vianet Group Inc (NASDAQ:VNET) was in 33 hedge funds' portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 24. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 24 hedge funds in our database with VNET positions at the end of the third quarter. Our calculations also showed that VNET isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings).
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 124 percentage points since March 2017 (see the details here).
Michael Gelband of ExodusPoint Capital
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we heard that billionaire Peter Thiel is backing this psychedelic-drug startup. So, we are taking a closer look at this space. We go through lists like the 10 best biotech stocks under $10 to identify the next stock with 10x upside potential. 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. Keeping this in mind let's view the new hedge fund action surrounding 21Vianet Group Inc (NASDAQ:VNET).
Do Hedge Funds Think VNET Is A Good Stock To Buy Now?
At the end of December, a total of 33 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 38% from the third quarter of 2020. By comparison, 16 hedge funds held shares or bullish call options in VNET a year ago. With hedge funds' capital changing hands, there exists a select group of notable hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
The largest stake in 21Vianet Group Inc (NASDAQ:VNET) was held by Bloom Tree Partners, which reported holding $111.2 million worth of stock at the end of December. It was followed by Sylebra Capital Management with a $96.1 million position. Other investors bullish on the company included Jericho Capital Asset Management, Point72 Asset Management, and CaaS Capital. In terms of the portfolio weights assigned to each position Bloom Tree Partners allocated the biggest weight to 21Vianet Group Inc (NASDAQ:VNET), around 7.73% of its 13F portfolio. Tiger Pacific Capital is also relatively very bullish on the stock, earmarking 6.56 percent of its 13F equity portfolio to VNET.
Consequently, specific money managers have jumped into 21Vianet Group Inc (NASDAQ:VNET) headfirst. CaaS Capital, managed by Frank Fu, initiated the most valuable position in 21Vianet Group Inc (NASDAQ:VNET). CaaS Capital had $53.4 million invested in the company at the end of the quarter. Simon Sadler's Segantii Capital also initiated a $38.1 million position during the quarter. The other funds with new positions in the stock are Richard Gerson and Navroz D. Udwadia's Falcon Edge Capital, Robert Boucai's Newbrook Capital Advisors, and Michael Gelband's ExodusPoint Capital.
Let's also examine hedge fund activity in other stocks similar to 21Vianet Group Inc (NASDAQ:VNET). We will take a look at SmileDirectClub, Inc. (NASDAQ:SDC), Sinopec Shanghai Petrochemical Co. (NYSE:SHI), Xerox Holdings Corporation (NYSE:XRX), Spirit Realty Capital Inc (NYSE:SRC), Graphic Packaging Holding Company (NYSE:GPK), China Biologic Products Holdings Inc (NASDAQ:CBPO), and Qurate Retail, Inc. (NASDAQ:QRTEA). All of these stocks' market caps match VNET's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SDC,25,182727,-3 SHI,5,14178,2 XRX,27,1011222,-1 SRC,17,214681,1 GPK,26,375108,-4 CBPO,16,895769,-2 QRTEA,36,831569,-5 Average,21.7,503608,-1.7 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.7 hedge funds with bullish positions and the average amount invested in these stocks was $504 million. That figure was $731 million in VNET's case. Qurate Retail, Inc. (NASDAQ:QRTEA) is the most popular stock in this table. On the other hand Sinopec Shanghai Petrochemical Co. (NYSE:SHI) is the least popular one with only 5 bullish hedge fund positions. 21Vianet Group Inc (NASDAQ:VNET) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for VNET is 85.2. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 7.9% in 2021 through April 1st and beat the market again by 0.4 percentage points. Unfortunately VNET wasn't nearly as popular as these 30 stocks and hedge funds that were betting on VNET were disappointed as the stock returned -3.3% since the end of December (through 4/1) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.