In this article we will take a look at whether hedge funds think Virtu Financial Inc (NASDAQ:VIRT) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Is Virtu Financial Inc (NASDAQ:VIRT) a buy here? Prominent investors were taking a bearish view. The number of bullish hedge fund bets went down by 5 in recent months. Virtu Financial Inc (NASDAQ:VIRT) was in 22 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 28. Our calculations also showed that VIRT isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 27 hedge funds in our database with VIRT holdings at the end of December.
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 115 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.
Cliff Asness of AQR Capital Management
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Do Hedge Funds Think VIRT Is A Good Stock To Buy Now?
Heading into the second quarter of 2021, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of -19% from the fourth quarter of 2020. Below, you can check out the change in hedge fund sentiment towards VIRT over the last 23 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Renaissance Technologies, holds the most valuable position in Virtu Financial Inc (NASDAQ:VIRT). Renaissance Technologies has a $170.3 million position in the stock, comprising 0.2% of its 13F portfolio. Coming in second is AQR Capital Management, led by Cliff Asness, holding a $54.5 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Other members of the smart money that are bullish encompass Jacob Doft’s Highline Capital Management, Parsa Kiai’s Steamboat Capital Partners and D. E. Shaw’s D E Shaw. In terms of the portfolio weights assigned to each position Highline Capital Management allocated the biggest weight to Virtu Financial Inc (NASDAQ:VIRT), around 6.56% of its 13F portfolio. Steamboat Capital Partners is also relatively very bullish on the stock, designating 2.78 percent of its 13F equity portfolio to VIRT.
Due to the fact that Virtu Financial Inc (NASDAQ:VIRT) has experienced bearish sentiment from the smart money, it’s safe to say that there were a few hedgies who were dropping their entire stakes last quarter. It’s worth mentioning that Paul Marshall and Ian Wace’s Marshall Wace LLP dropped the largest position of the “upper crust” of funds monitored by Insider Monkey, totaling an estimated $9.4 million in stock, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital was right behind this move, as the fund sold off about $9.1 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest was cut by 5 funds last quarter.
Let’s go over hedge fund activity in other stocks similar to Virtu Financial Inc (NASDAQ:VIRT). These stocks are Halozyme Therapeutics, Inc. (NASDAQ:HALO), Choice Hotels International, Inc. (NYSE:CHH), American Campus Communities, Inc. (NYSE:ACC), Acuity Brands, Inc. (NYSE:AYI), Popular Inc (NASDAQ:BPOP), SYNNEX Corporation (NYSE:SNX), and Sarepta Therapeutics Inc (NASDAQ:SRPT). All of these stocks’ market caps are closest to VIRT’s market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HALO,23,210743,-2 CHH,17,123430,2 ACC,26,231239,11 AYI,31,969322,2 BPOP,34,873784,-1 SNX,15,614677,-9 SRPT,33,526911,-4 Average,25.6,507158,-0.1 [/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 $507 million. That figure was $302 million in VIRT’s case. Popular Inc (NASDAQ:BPOP) is the most popular stock in this table. On the other hand SYNNEX Corporation (NYSE:SNX) is the least popular one with only 15 bullish hedge fund positions. Virtu Financial Inc (NASDAQ:VIRT) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for VIRT is 42. 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 23.8% in 2021 through July 16th and surpassed the market again by 7.7 percentage points. Unfortunately VIRT wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); VIRT investors were disappointed as the stock returned -15.5% since the end of March (through 7/16) 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.