After several tireless days we have finished crunching the numbers from nearly 900 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms' equity portfolios as of June 30th. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards Vroom, Inc. (NASDAQ:VRM).
Vroom, Inc. (NASDAQ:VRM) shares haven't seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 21 hedge funds' portfolios at the end of the second quarter of 2021. Our calculations also showed that VRM isn't among the 30 most popular stocks among hedge funds (click for Q2 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 Exelixis, Inc. (NASDAQ:EXEL), Select Medical Holdings Corporation (NYSE:SEM), and Herbalife Nutrition Ltd. (NYSE:HLF) to gather more data points.
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.
David E. Shaw of D.E. Shaw
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Do Hedge Funds Think VRM Is A Good Stock To Buy Now?
At second quarter's end, a total of 21 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the first quarter of 2020. On the other hand, there were a total of 28 hedge funds with a bullish position in VRM a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Miller Value Partners held the most valuable stake in Vroom, Inc. (NASDAQ:VRM), which was worth $106.4 million at the end of the second quarter. On the second spot was Citadel Investment Group which amassed $17.2 million worth of shares. D E Shaw, Renaissance Technologies, and Millennium 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 Yarra Square Partners allocated the biggest weight to Vroom, Inc. (NASDAQ:VRM), around 5.78% of its 13F portfolio. Miller Value Partners is also relatively very bullish on the stock, designating 2.53 percent of its 13F equity portfolio to VRM.
Seeing as Vroom, Inc. (NASDAQ:VRM) has experienced declining sentiment from the entirety of the hedge funds we track, we can see that there lies a certain "tier" of money managers that elected to cut their entire stakes heading into Q3. It's worth mentioning that Michael Pausic's Foxhaven Asset Management dropped the biggest investment of the 750 funds followed by Insider Monkey, worth about $78.5 million in stock. Steve Cohen's fund, Point72 Asset Management, also dropped its stock, about $67.2 million worth. These moves are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Vroom, Inc. (NASDAQ:VRM) but similarly valued. These stocks are Exelixis, Inc. (NASDAQ:EXEL), Select Medical Holdings Corporation (NYSE:SEM), Herbalife Nutrition Ltd. (NYSE:HLF), TFS Financial Corporation (NASDAQ:TFSL), Fisker Inc. (NYSE:FSR), PLDT Inc. (NYSE:PHI), and Celsius Holdings, Inc. (NASDAQ:CELH). This group of stocks' market valuations are similar to VRM's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position EXEL,33,802812,6 SEM,24,251021,2 HLF,40,2095168,0 TFSL,9,143366,3 FSR,16,256224,-6 PHI,5,88800,1 CELH,20,232853,5 Average,21,552892,1.6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 21 hedge funds with bullish positions and the average amount invested in these stocks was $553 million. That figure was $181 million in VRM's case. Herbalife Nutrition Ltd. (NYSE:HLF) is the most popular stock in this table. On the other hand PLDT Inc. (NYSE:PHI) is the least popular one with only 5 bullish hedge fund positions. Vroom, Inc. (NASDAQ:VRM) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for VRM is 46.4. 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 negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. 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 24% in 2021 through October 22nd and surpassed the market again by 1.6 percentage points. Unfortunately VRM wasn't nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); VRM investors were disappointed as the stock returned -50.9% since the end of June (through 10/22) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.
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Disclosure: None. This article was originally published at Insider Monkey.