We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Melvin Capital’s recent GameStop losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Activision Blizzard, Inc. (NASDAQ:ATVI).
Activision Blizzard, Inc. (NASDAQ:ATVI) investors should pay attention to an increase in activity from the world’s largest hedge funds of late. Activision Blizzard, Inc. (NASDAQ:ATVI) was in 78 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 101. There were 76 hedge funds in our database with ATVI holdings at the end of March. Our calculations also showed that ATVI isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. 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. 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 homepage. With all of this in mind we’re going to take a look at the key hedge fund action encompassing Activision Blizzard, Inc. (NASDAQ:ATVI).
Do Hedge Funds Think ATVI Is A Good Stock To Buy Now?
Heading into the third quarter of 2021, a total of 78 of the hedge funds tracked by Insider Monkey were long this stock, a change of 3% from the previous quarter. The graph below displays the number of hedge funds with bullish position in ATVI over the last 24 quarters. With the smart money’s capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
Among these funds, Alkeon Capital Management held the most valuable stake in Activision Blizzard, Inc. (NASDAQ:ATVI), which was worth $444.1 million at the end of the second quarter. On the second spot was Arrowstreet Capital which amassed $322.1 million worth of shares. Melvin Capital Management, Holocene Advisors, and Renaissance Technologies 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 Incline Global Management allocated the biggest weight to Activision Blizzard, Inc. (NASDAQ:ATVI), around 5.53% of its 13F portfolio. Fernbridge Capital Management is also relatively very bullish on the stock, setting aside 4.44 percent of its 13F equity portfolio to ATVI.
As industrywide interest jumped, key money managers have jumped into Activision Blizzard, Inc. (NASDAQ:ATVI) headfirst. Bridgewater Associates, managed by Ray Dalio, assembled the biggest position in Activision Blizzard, Inc. (NASDAQ:ATVI). Bridgewater Associates had $26.5 million invested in the company at the end of the quarter. Gregg Moskowitz’s Interval Partners also made a $17.7 million investment in the stock during the quarter. The other funds with brand new ATVI positions are James Crichton’s Hitchwood Capital Management, Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners, and Josh Resnick’s Jericho Capital Asset Management.
Let’s go over hedge fund activity in other stocks similar to Activision Blizzard, Inc. (NASDAQ:ATVI). These stocks are CSX Corporation (NYSE:CSX), The Sherwin-Williams Company (NYSE:SHW), Coupang, Inc. (NYSE:CPNG), Equinix Inc (NASDAQ:EQIX), Snowflake Inc (NYSE:SNOW), Marsh & McLennan Companies, Inc. (NYSE:MMC), and Chubb Limited (NYSE:CB). This group of stocks’ market values are closest to ATVI’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CSX | 56 | 4223857 | 3 |
| SHW | 49 | 2028984 | -2 |
| CPNG | 33 | 18042813 | -7 |
| EQIX | 33 | 1266516 | -8 |
| SNOW | 70 | 12507692 | -1 |
| MMC | 41 | 2537494 | 4 |
| CB | 42 | 1737776 | 1 |
| Average | 46.3 | 6049305 | -1.4 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 46.3 hedge funds with bullish positions and the average amount invested in these stocks was $6049 million. That figure was $3652 million in ATVI’s case. Snowflake Inc (NYSE:SNOW) is the most popular stock in this table. On the other hand Coupang, Inc. (NYSE:CPNG) is the least popular one with only 33 bullish hedge fund positions. Compared to these stocks Activision Blizzard, Inc. (NASDAQ:ATVI) is more popular among hedge funds. Our overall hedge fund sentiment score for ATVI is 80.2. 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. 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 24.1% in 2021 through September 20th and still beat the market by 6.9 percentage points. Unfortunately ATVI wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on ATVI were disappointed as the stock returned -20.2% since the end of the second quarter (through 9/20) 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 since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.
