Hedge Funds Are Dumping Activision Blizzard, Inc. (ATVI)

Between June 25 and October 30th the Russell 2000 ETF (IWM) lagged the larger S&P 500 ETF (SPY) by more than 14 percentage points as investors worried over the possible ramifications of rising interest rates. The hedge funds and institutional investors we track typically invest more in smaller-cap stocks than an average investor, and we have seen data that shows those funds paring back their overall exposure. Those funds cutting positions in small-caps is one reason why volatility has increased. In the following paragraphs, we take a closer look at what hedge funds and prominent investors think of Activision Blizzard, Inc. (NASDAQ:ATVI) and see how the stock is affected by the recent hedge fund activity.

Activision Blizzard, Inc. (NASDAQ:ATVI) was in 43 hedge funds’ portfolios at the end of September. ATVI investors should pay attention to a decrease in activity from the world’s largest hedge funds lately. There were 46 hedge funds in our database with ATVI positions at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity, but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Fiat Chrysler Automobiles NV (NYSE:FCAU), Chipotle Mexican Grill, Inc. (NYSE:CMG), and TransCanada Corporation (USA) (NYSE:TRP) to gather more data points.

According to most traders, hedge funds are assumed to be slow, old financial tools of years past. While there are more than 8000 funds in operation at present, We hone in on the masters of this group, about 700 funds. These money managers watch over most of the hedge fund industry’s total asset base, and by observing their matchless equity investments, Insider Monkey has deciphered several investment strategies that have historically defeated the broader indices. Insider Monkey’s small-cap hedge fund strategy outpaced the S&P 500 index by 12 percentage points a year for a decade in their back tests.

With all of this in mind, let’s take a look at the new action surrounding Activision Blizzard, Inc. (NASDAQ:ATVI).

Hedge fund activity in Activision Blizzard, Inc. (NASDAQ:ATVI)

Heading into Q4, a total of 43 of the hedge funds tracked by Insider Monkey were long this stock, a change of -7% from the previous quarter. With hedgies’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were upping their holdings considerably (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, John Armitage’s Egerton Capital Limited has the most valuable position in Activision Blizzard, Inc. (NASDAQ:ATVI), worth close to $315.3 million, amounting to 3.6% of its total 13F portfolio. Sitting at the No. 2 spot is Lone Pine Capital, led by Stephen Mandel, holding an $287.1 million position; the fund has 1.2% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors that hold long positions include Philippe Laffont’s Coatue Management, Panayotis Takis Sparaggis’ Alkeon Capital Management and Israel Englander’s Millennium Management.

Judging by the fact that Activision Blizzard, Inc. (NASDAQ:ATVI) has witnessed declining sentiment from hedge fund managers, logic holds that there is a sect of funds that slashed their entire stakes in the third quarter. Intriguingly, Jim Simons’s Renaissance Technologies dropped the biggest investment of the “upper crust” of funds tracked by Insider Monkey, worth an estimated $59.8 million in stock. John Overdeck and David Siegel’s fund, Two Sigma Advisors, also sold off its stock, about $38 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest was cut by 3 funds in the third quarter.

Let’s check out hedge fund activity in other stocks similar to Activision Blizzard, Inc. (NASDAQ:ATVI). These stocks are Fiat Chrysler Automobiles NV (NYSE:FCAU), Chipotle Mexican Grill, Inc. (NYSE:CMG), TransCanada Corporation (USA) (NYSE:TRP), and AutoZone, Inc. (NYSE:AZO). This group of stocks’ market values match ATVI’s market value.

As you can see these stocks had an average of 29 hedge funds with bullish positions and the average amount invested in these stocks was $975 million. That figure was $2087 million in ATVI’s case. AutoZone, Inc. (NYSE:AZO) is the most popular stock in this table. On the other hand TransCanada Corporation (USA) (NYSE:TRP) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks Activision Blizzard, Inc. (NASDAQ:ATVI) 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.