Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Avient Corporation (NYSE:AVNT)? The smart money sentiment can provide an answer to this question.
Avient Corporation (NYSE:AVNT) was in 24 hedge funds’ portfolios at the end of March. The all time high for this statistic is 28. AVNT has seen an increase in activity from the world’s largest hedge funds lately. There were 17 hedge funds in our database with AVNT holdings at the end of December. Our calculations also showed that AVNT isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Ian Wace of Marshall Wace
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, Chuck Schumer recently stated that marijuana legalization will be a Senate priority. So, we are checking out this under the radar stock that will benefit from this. We go through lists like the 10 best battery 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. Now we’re going to take a peek at the new hedge fund action encompassing Avient Corporation (NYSE:AVNT).
Do Hedge Funds Think AVNT Is A Good Stock To Buy Now?
At the end of March, a total of 24 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 41% from the previous quarter. The graph below displays the number of hedge funds with bullish position in AVNT over the last 23 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).
More specifically, P2 Capital Partners was the largest shareholder of Avient Corporation (NYSE:AVNT), with a stake worth $66.3 million reported as of the end of March. Trailing P2 Capital Partners was Marshall Wace LLP, which amassed a stake valued at $43.7 million. Scopus Asset Management, GMT Capital, 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 P2 Capital Partners allocated the biggest weight to Avient Corporation (NYSE:AVNT), around 4.4% of its 13F portfolio. GMT Capital is also relatively very bullish on the stock, setting aside 1.78 percent of its 13F equity portfolio to AVNT.
As industrywide interest jumped, specific money managers have been driving this bullishness. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, assembled the biggest position in Avient Corporation (NYSE:AVNT). Marshall Wace LLP had $43.7 million invested in the company at the end of the quarter. Richard SchimeláandáLawrence Sapanski’s Cinctive Capital Management also made a $6.3 million investment in the stock during the quarter. The other funds with new positions in the stock are Andrew Byington’s Appian Way Asset Management, Greg Eisner’s Engineers Gate Manager, and Mika Toikka’s AlphaCrest Capital Management.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Avient Corporation (NYSE:AVNT) but similarly valued. These stocks are Wintrust Financial Corporation (NASDAQ:WTFC), Innovative Industrial Properties, Inc. (NYSE:IIPR), Antero Midstream Corp (NYSE:AM), Armstrong World Industries, Inc. (NYSE:AWI), Healthcare Realty Trust Inc (NYSE:HR), Olink Holding AB (publ) (NASDAQ:OLK), and Seaboard Corporation (NYSE:SEB). This group of stocks’ market valuations resemble AVNT’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| WTFC | 19 | 176919 | 0 |
| IIPR | 13 | 192649 | -10 |
| AM | 17 | 123037 | -2 |
| AWI | 25 | 511972 | -6 |
| HR | 20 | 172535 | -3 |
| OLK | 20 | 174006 | 20 |
| SEB | 14 | 125291 | 1 |
| Average | 18.3 | 210916 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.3 hedge funds with bullish positions and the average amount invested in these stocks was $211 million. That figure was $232 million in AVNT’s case. Armstrong World Industries, Inc. (NYSE:AWI) is the most popular stock in this table. On the other hand Innovative Industrial Properties, Inc. (NYSE:IIPR) is the least popular one with only 13 bullish hedge fund positions. Avient Corporation (NYSE:AVNT) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for AVNT is 81.5. 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 positive signal but 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 beat the market again by 7.7 percentage points. Unfortunately AVNT wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on AVNT were disappointed as the stock returned -1.7% 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 many of these stocks already outperformed the market since 2019.
Follow Avient Corp (NYSE:AVNT)
Follow Avient Corp (NYSE:AVNT)
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Disclosure: None. This article was originally published at Insider Monkey.
