Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Avery Dennison Corporation (NYSE:AVY).
Avery Dennison Corporation (NYSE:AVY) investors should pay attention to an increase in hedge fund sentiment recently. Avery Dennison Corporation (NYSE:AVY) was in 34 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic was previously 30. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 20 hedge funds in our database with AVY holdings at the end of March. Our calculations also showed that AVY isn’t among the 30 most popular stocks among hedge funds (click for Q2 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 185.4% since March 2017 and outperformed the S&P 500 ETFs by more than 79 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Dmitry Balyasny of Balyasny Asset Management
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, we like undervalued, EBITDA-positive growth stocks, so we are checking out stock pitches like this emerging biotech 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. Keeping this in mind let’s view the latest hedge fund action surrounding Avery Dennison Corporation (NYSE:AVY).
Do Hedge Funds Think AVY Is A Good Stock To Buy Now?
At Q2’s end, a total of 34 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 70% from the previous quarter. The graph below displays the number of hedge funds with bullish position in AVY over the last 24 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
The largest stake in Avery Dennison Corporation (NYSE:AVY) was held by Select Equity Group, which reported holding $571.9 million worth of stock at the end of June. It was followed by Citadel Investment Group with a $56.7 million position. Other investors bullish on the company included AQR Capital Management, Millennium Management, and Renaissance Technologies. In terms of the portfolio weights assigned to each position Appian Way Asset Management allocated the biggest weight to Avery Dennison Corporation (NYSE:AVY), around 9.67% of its 13F portfolio. Running Oak Capital is also relatively very bullish on the stock, setting aside 3.49 percent of its 13F equity portfolio to AVY.
Consequently, some big names were breaking ground themselves. Renaissance Technologies, established the most valuable position in Avery Dennison Corporation (NYSE:AVY). Renaissance Technologies had $29.9 million invested in the company at the end of the quarter. Steve Cohen’s Point72 Asset Management also initiated a $16.3 million position during the quarter. The following funds were also among the new AVY investors: Paul Marshall and Ian Wace’s Marshall Wace LLP, Michael Gelband’s ExodusPoint Capital, and Dmitry Balyasny’s Balyasny Asset Management.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Avery Dennison Corporation (NYSE:AVY) but similarly valued. These stocks are Tata Motors Limited (NYSE:TTM), Jacobs Engineering Group Inc. (NYSE:J), The AES Corporation (NYSE:AES), ASE Technology Holding Co., Ltd. (NYSE:ASX), PerkinElmer, Inc. (NYSE:PKI), Viatris Inc. (NASDAQ:VTRS), and J.B. Hunt Transport Services, Inc. (NASDAQ:JBHT). This group of stocks’ market caps are similar to AVY’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TTM | 8 | 69120 | 0 |
| J | 29 | 1030453 | 5 |
| AES | 39 | 1422533 | -12 |
| ASX | 7 | 241132 | -1 |
| PKI | 32 | 1969240 | -1 |
| VTRS | 53 | 1532159 | -5 |
| JBHT | 26 | 347997 | 4 |
| Average | 27.7 | 944662 | -1.4 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 27.7 hedge funds with bullish positions and the average amount invested in these stocks was $945 million. That figure was $872 million in AVY’s case. Viatris Inc. (NASDAQ:VTRS) is the most popular stock in this table. On the other hand ASE Technology Holding Co., Ltd. (NYSE:ASX) is the least popular one with only 7 bullish hedge fund positions. Avery Dennison Corporation (NYSE:AVY) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for AVY is 69.3. 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 21.8% in 2021 through October 11th and beat the market again by 4.4 percentage points. Unfortunately AVY wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on AVY were disappointed as the stock returned -1.7% since the end of June (through 10/11) 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 Avery Dennison Corp (NYSE:AVY)
Follow Avery Dennison Corp (NYSE:AVY)
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Disclosure: None. This article was originally published at Insider Monkey.
