Hedge funds are not perfect. They have their bad picks just like everyone else. Facebook, a stock hedge funds have loved, lost a third of its value since the end of July. Although hedge funds are not perfect, their consensus picks do deliver solid returns, however. Our data show the top 30 S&P 500 stocks among hedge funds at the end of September 2018 yielded an average return of 6.7% year-to-date, vs. a gain of 2.6% for the S&P 500 Index. Because hedge funds have a lot of resources and their consensus picks do well, we pay attention to what they think. In this article, we analyze what the elite funds think of Avid Technology, Inc. (NASDAQ:AVID).
Avid Technology, Inc. (NASDAQ:AVID) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 13 hedge funds’ portfolios at the end of September. At the end of this article we will also compare AVID to other stocks including Quintana Energy Services Inc. (NYSE:QES), Atlantic Power Corp (NYSE:AT), and Bankwell Financial Group, Inc. (NASDAQ:BWFG) to get a better sense of its popularity.
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 market by 18 percentage points since May 2014 through December 3, 2018 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
We’re going to take a peek at the key hedge fund action regarding Avid Technology, Inc. (NASDAQ:AVID).
What have hedge funds been doing with Avid Technology, Inc. (NASDAQ:AVID)?
At Q3’s end, a total of 13 of the hedge funds tracked by Insider Monkey were long this stock, no change from the second quarter of 2018. By comparison, 15 hedge funds held shares or bullish call options in AVID heading into this year. With the smart money’s sentiment swirling, there exists a select group of notable hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).
More specifically, Cove Street Capital was the largest shareholder of Avid Technology, Inc. (NASDAQ:AVID), with a stake worth $37.2 million reported as of the end of September. Trailing Cove Street Capital was Royce & Associates, which amassed a stake valued at $8.9 million. Private Capital Management, AQR Capital Management, and Two Sigma Advisors were also very fond of the stock, giving the stock large weights in their portfolios.
Seeing as Avid Technology, Inc. (NASDAQ:AVID) has experienced falling interest from the aggregate hedge fund industry, logic holds that there were a few money managers who sold off their entire stakes last quarter. It’s worth mentioning that Richard Blum’s Blum Capital Partners cut the largest position of the “upper crust” of funds followed by Insider Monkey, worth about $34.1 million in stock. Dmitry Balyasny’s fund, Balyasny Asset Management, also sold off its stock, about $0.2 million worth. These transactions are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Avid Technology, Inc. (NASDAQ:AVID) but similarly valued. These stocks are Quintana Energy Services Inc. (NYSE:QES), Atlantic Power Corp (NYSE:AT), Bankwell Financial Group, Inc. (NASDAQ:BWFG), and Maui Land & Pineapple Company, Inc. (NYSE:MLP). This group of stocks’ market caps resemble AVID’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| QES | 4 | 25966 | 1 |
| AT | 8 | 18556 | -2 |
| BWFG | 5 | 35694 | 0 |
| MLP | 2 | 7687 | -1 |
| Average | 4.75 | 21976 | -0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 4.75 hedge funds with bullish positions and the average amount invested in these stocks was $22 million. That figure was $58 million in AVID’s case. Atlantic Power Corp (NYSE:AT) is the most popular stock in this table. On the other hand Maui Land & Pineapple Co. (NYSE:MLP) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks Avid Technology, Inc. (NASDAQ:AVID) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
Disclosure: None. This article was originally published at Insider Monkey.
