Reputable billionaire investors such as Nelson Peltz and David Tepper generate exorbitant profits for their wealthy accredited investors (a minimum of $1 million in investable assets would be required to invest in a hedge fund and most successful hedge funds won’t accept your savings unless you commit at least $5 million) by pinpointing winning small-cap stocks. There is little or no publicly-available information at all on some of these small companies, which makes it hard for an individual investor to pin down a winner within the small-cap space. However, hedge funds and other big asset managers can do the due diligence and analysis for you instead, thanks to their highly-skilled research teams and vast resources to conduct an appropriate evaluation process. Looking for potential winners within the small-cap galaxy of stocks? We believe following the smart money is a good starting point.
Avanos Medical, Inc. (NYSE:AVNS) has seen an increase in enthusiasm from smart money of late. AVNS was in 17 hedge funds’ portfolios at the end of September. There were 16 hedge funds in our database with AVNS holdings at the end of the previous quarter. Our calculations also showed that AVNS isn’t among the 30 most popular stocks among hedge funds.
In the 21st century investor’s toolkit there are numerous metrics stock traders have at their disposal to analyze publicly traded companies. Some of the most innovative metrics are hedge fund and insider trading sentiment. We have shown that, historically, those who follow the top picks of the best money managers can outpace the broader indices by a solid margin (see the details here).
Let’s go over the key hedge fund action encompassing Avanos Medical, Inc. (NYSE:AVNS).
What does the smart money think about Avanos Medical, Inc. (NYSE:AVNS)?
Heading into the fourth quarter of 2018, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 6% from the second quarter of 2018. The graph below displays the number of hedge funds with bullish position in AVNS over the last 13 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Avanos Medical, Inc. (NYSE:AVNS) was held by Select Equity Group, which reported holding $35.7 million worth of stock at the end of September. It was followed by Polar Capital with a $16.7 million position. Other investors bullish on the company included Gotham Asset Management, Renaissance Technologies, and Millennium Management.
As one would reasonably expect, some big names were breaking ground themselves. Select Equity Group, managed by Robert Joseph Caruso, assembled the most valuable position in Avanos Medical, Inc. (NYSE:AVNS). Select Equity Group had $35.7 million invested in the company at the end of the quarter. Brian Ashford-Russell and Tim Woolley’s Polar Capital also made a $16.7 million investment in the stock during the quarter. The other funds with brand new AVNS positions are Joel Greenblatt’s Gotham Asset Management, Jim Simons’s Renaissance Technologies, and Israel Englander’s Millennium Management.
Let’s check out hedge fund activity in other stocks similar to Avanos Medical, Inc. (NYSE:AVNS). We will take a look at Chegg Inc (NYSE:CHGG), BancorpSouth Bank (NYSE:BXS), LHC Group, Inc. (NASDAQ:LHCG), and PDC Energy Inc (NASDAQ:PDCE). This group of stocks’ market values are similar to AVNS’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CHGG | 21 | 368868 | 5 |
| BXS | 7 | 101577 | 0 |
| LHCG | 25 | 145948 | 1 |
| PDCE | 19 | 181951 | 4 |
| Average | 18 | 199586 | 2.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 18 hedge funds with bullish positions and the average amount invested in these stocks was $200 million. That figure was $114 million in AVNS’s case. LHC Group, Inc. (NASDAQ:LHCG) is the most popular stock in this table. On the other hand BancorpSouth Bank (NYSE:BXS) is the least popular one with only 7 bullish hedge fund positions. Avanos Medical, Inc. (NYSE:AVNS) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard LHCG might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.