In this article we are going to use hedge fund sentiment as a tool and determine whether Verizon Communications Inc. (NYSE:VZ) 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.
Verizon Communications Inc. (NYSE:VZ) investors should be aware of an increase in hedge fund sentiment in recent months. Verizon Communications Inc. (NYSE:VZ) was in 69 hedge funds’ portfolios at the end of March. The all time high for this statistic is 68. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 67 hedge funds in our database with VZ positions at the end of the fourth quarter. Our calculations also showed that VZ isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
At the moment there are plenty of signals shareholders have at their disposal to analyze publicly traded companies. A duo of the best signals are hedge fund and insider trading indicators. Our researchers have shown that, historically, those who follow the best picks of the best fund managers can outpace the market by a significant amount (see the details here). Also, our monthly newsletter’s portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .
Warren Buffett of Berkshire Hathaway
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Do Hedge Funds Think VZ Is A Good Stock To Buy Now?
At first quarter’s end, a total of 69 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 3% from the previous quarter. By comparison, 68 hedge funds held shares or bullish call options in VZ 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.
More specifically, Berkshire Hathaway was the largest shareholder of Verizon Communications Inc. (NYSE:VZ), with a stake worth $9235.6 million reported as of the end of March. Trailing Berkshire Hathaway was AQR Capital Management, which amassed a stake valued at $317.4 million. Diamond Hill Capital, Empyrean Capital Partners, and D E Shaw 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 Heathbridge Capital Management allocated the biggest weight to Verizon Communications Inc. (NYSE:VZ), around 8.84% of its 13F portfolio. Courage Capital is also relatively very bullish on the stock, dishing out 5.95 percent of its 13F equity portfolio to VZ.
With a general bullishness amongst the heavyweights, specific money managers were breaking ground themselves. Diamond Hill Capital, managed by Ric Dillon, assembled the biggest position in Verizon Communications Inc. (NYSE:VZ). Diamond Hill Capital had $242 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also initiated a $121.7 million position during the quarter. The following funds were also among the new VZ investors: Renaissance Technologies, Brandon Haley’s Holocene Advisors, and Jinghua Yan’s TwinBeech Capital.
Let’s check out hedge fund activity in other stocks similar to Verizon Communications Inc. (NYSE:VZ). These stocks are Exxon Mobil Corporation (NYSE:XOM), Netflix, Inc. (NASDAQ:NFLX), Adobe Inc. (NASDAQ:ADBE), The Coca-Cola Company (NYSE:KO), Cisco Systems, Inc. (NASDAQ:CSCO), Toyota Motor Corporation (NYSE:TM), and AT&T Inc. (NYSE:T). This group of stocks’ market caps are closest to VZ‘s market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position XOM,65,2770198,2 NFLX,110,14159343,-6 ADBE,107,12111692,-7 KO,61,24903946,-1 CSCO,59,5194074,-1 TM,18,824174,7 T,63,2701777,5 Average,69,8952172,-0.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 69 hedge funds with bullish positions and the average amount invested in these stocks was $8952 million. That figure was $11384 million in VZ‘s case. Netflix, Inc. (NASDAQ:NFLX) is the most popular stock in this table. On the other hand Toyota Motor Corporation (NYSE:TM) is the least popular one with only 18 bullish hedge fund positions. Verizon Communications Inc. (NYSE:VZ) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for VZ is 64.7. 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 17.2% in 2021 through June 11th and surpassed the market again by 3.3 percentage points. Unfortunately VZ wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); VZ investors were disappointed as the stock returned -0.3% since the end of March (through 6/11) 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.
Disclosure: None. This article was originally published at Insider Monkey.