Hedge funds are not perfect. They have their bad picks just like everyone else. Facebook, a stock hedge funds have loved dearly, lost nearly 40% of its value at one point in 2018. Although hedge funds are not perfect, their consensus picks do deliver solid returns, however. Our data show the top 20 S&P 500 stocks among hedge funds beat the S&P 500 Index by 4 percentage points so far in 2019. 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 Avaya Holdings Corp. (NYSE:AVYA).
Avaya Holdings Corp. (NYSE:AVYA) has experienced an increase in activity from the world’s largest hedge funds in recent months. Our calculations also showed that AVYA isn’t among the 30 most popular stocks among hedge funds (see the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s go over the fresh hedge fund action encompassing Avaya Holdings Corp. (NYSE:AVYA).
What does smart money think about Avaya Holdings Corp. (NYSE:AVYA)?
At Q2’s end, a total of 42 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 5% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards AVYA over the last 16 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Highland Capital Management was the largest shareholder of Avaya Holdings Corp. (NYSE:AVYA), with a stake worth $36.4 million reported as of the end of March. Trailing Highland Capital Management was Anchorage Advisors, which amassed a stake valued at $29.3 million. Taconic Capital, Melqart Asset Management, and Point72 Asset Management were also very fond of the stock, giving the stock large weights in their portfolios.
As one would reasonably expect, some big names were breaking ground themselves. Rubric Capital Management, managed by David Rosen, assembled the most valuable call position in Avaya Holdings Corp. (NYSE:AVYA). Rubric Capital Management had $15.2 million invested in the company at the end of the quarter. Glenn Russell Dubin’s Highbridge Capital Management also made a $10.5 million investment in the stock during the quarter. The following funds were also among the new AVYA investors: Ken Griffin’s Citadel Investment Group, Eric Singer’s VIEX Capital Advisors, and Himanshu Gulati’s Antara Capital.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Avaya Holdings Corp. (NYSE:AVYA) but similarly valued. These stocks are Eidos Therapeutics, Inc. (NASDAQ:EIDX), Waddell & Reed Financial, Inc. (NYSE:WDR), Easterly Government Properties Inc (NYSE:DEA), and United Fire Group, Inc. (NASDAQ:UFCS). This group of stocks’ market caps resemble AVYA’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| EIDX | 11 | 221663 | 3 |
| WDR | 18 | 127891 | 0 |
| DEA | 6 | 60382 | 0 |
| UFCS | 10 | 17181 | 0 |
| Average | 11.25 | 106779 | 0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.25 hedge funds with bullish positions and the average amount invested in these stocks was $107 million. That figure was $310 million in AVYA’s case. Waddell & Reed Financial, Inc. (NYSE:WDR) is the most popular stock in this table. On the other hand Easterly Government Properties Inc (NYSE:DEA) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Avaya Holdings Corp. (NYSE:AVYA) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately AVYA wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on AVYA were disappointed as the stock returned -14.1% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market in Q3.
Disclosure: None. This article was originally published at Insider Monkey.
