Hedge Funds Are Selling Avalara, Inc. (AVLR)

The Insider Monkey team has completed processing the quarterly 13F filings for the June quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Avalara, Inc. (NYSE:AVLR).

Avalara, Inc. (NYSE:AVLR) investors should be aware of a decrease in activity from the world’s largest hedge funds recently. Avalara, Inc. (NYSE:AVLR) was in 29 hedge funds’ portfolios at the end of June. The all time high for this statistic is 56. Our calculations also showed that AVLR isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

In the eyes of most shareholders, hedge funds are viewed as underperforming, outdated financial tools of yesteryear. While there are more than 8000 funds in operation today, We choose to focus on the moguls of this group, around 850 funds. These money managers orchestrate the majority of the smart money’s total asset base, and by following their finest picks, Insider Monkey has deciphered a number of investment strategies that have historically outpaced the broader indices. Insider Monkey’s flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Also, our monthly newsletter’s portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website.

Steven Cohen of Point72 Asset Management

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. Now let’s go over the recent hedge fund action regarding Avalara, Inc. (NYSE:AVLR).

Do Hedge Funds Think AVLR Is A Good Stock To Buy Now?

At the end of the second quarter, a total of 29 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -29% from one quarter earlier. By comparison, 37 hedge funds held shares or bullish call options in AVLR a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Avalara, Inc. (NYSE:AVLR) was held by Alkeon Capital Management, which reported holding $440.5 million worth of stock at the end of June. It was followed by Tensile Capital with a $156.2 million position. Other investors bullish on the company included Echo Street Capital Management, Polar Capital, and Cota Capital. In terms of the portfolio weights assigned to each position Tensile Capital allocated the biggest weight to Avalara, Inc. (NYSE:AVLR), around 17.7% of its 13F portfolio. Ivy Lane Capital is also relatively very bullish on the stock, dishing out 13.85 percent of its 13F equity portfolio to AVLR.

Because Avalara, Inc. (NYSE:AVLR) has faced falling interest from the smart money, it’s safe to say that there is a sect of money managers that elected to cut their positions entirely heading into Q3. Interestingly, Renaissance Technologies dumped the largest position of the “upper crust” of funds tracked by Insider Monkey, worth close to $66.6 million in stock, and Amish Mehta’s SQN Investors was right behind this move, as the fund sold off about $59.6 million worth. These bearish behaviors are interesting, as total hedge fund interest fell by 12 funds heading into Q3.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Avalara, Inc. (NYSE:AVLR) but similarly valued. These stocks are Icahn Enterprises LP (NASDAQ:IEP), Open Text Corporation (NASDAQ:OTEX), Korea Electric Power Corporation (NYSE:KEP), Evergy, Inc. (NYSE:EVRG), Campbell Soup Company (NYSE:CPB), DENTSPLY SIRONA Inc. (NASDAQ:XRAY), and Vipshop Holdings Limited (NYSE:VIPS). This group of stocks’ market valuations are similar to AVLR’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 20.1 hedge funds with bullish positions and the average amount invested in these stocks was $2474 million. That figure was $1031 million in AVLR’s case. Vipshop Holdings Limited (NYSE:VIPS) is the most popular stock in this table. On the other hand Icahn Enterprises LP (NASDAQ:IEP) is the least popular one with only 4 bullish hedge fund positions. Avalara, Inc. (NYSE:AVLR) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for AVLR is 47.6. 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 24.9% in 2021 through October 15th and still beat the market by 4.5 percentage points. Hedge funds were also right about betting on AVLR as the stock returned 6.8% since the end of Q2 (through 10/15) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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Disclosure: None. This article was originally published at Insider Monkey.