Hedge funds and other investment firms that we track manage billions of dollars of their wealthy clients’ money, and needless to say, they are painstakingly thorough when analyzing where to invest this money, as their own wealth also depends on it. Regardless of the various methods used by elite investors like David Tepper and David Abrams, the resources they expend are second-to-none. This is especially valuable when it comes to small-cap stocks, which is where they generate their strongest outperformance, as their resources give them a huge edge when it comes to studying these stocks compared to the average investor, which is why we intently follow their activity in the small-cap space.
Is Avista Corp (NYSE:AVA) a first-rate investment today? Hedge funds are getting more bullish. The number of bullish hedge fund bets rose by 1 recently. Our calculations also showed that AVA isn’t among the 30 most popular stocks among hedge funds. AVA was in 18 hedge funds’ portfolios at the end of the fourth quarter of 2018. There were 17 hedge funds in our database with AVA positions at the end of the previous quarter.
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’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Let’s view the latest hedge fund action regarding Avista Corp (NYSE:AVA).
How are hedge funds trading Avista Corp (NYSE:AVA)?
At Q4’s end, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of 6% from one quarter earlier. By comparison, 15 hedge funds held shares or bullish call options in AVA a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).
Among these funds, Magnetar Capital held the most valuable stake in Avista Corp (NYSE:AVA), which was worth $129.1 million at the end of the fourth quarter. On the second spot was Falcon Edge Capital which amassed $46.5 million worth of shares. Moreover, Renaissance Technologies, Marshall Wace LLP, and D E Shaw were also bullish on Avista Corp (NYSE:AVA), allocating a large percentage of their portfolios to this stock.
As one would reasonably expect, some big names have jumped into Avista Corp (NYSE:AVA) headfirst. D E Shaw, managed by D. E. Shaw, established the biggest position in Avista Corp (NYSE:AVA). D E Shaw had $10.9 million invested in the company at the end of the quarter. Steve Cohen’s Point72 Asset Management also made a $6.3 million investment in the stock during the quarter. The other funds with new positions in the stock are Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners, and Michael Platt and William Reeves’s BlueCrest Capital Mgmt..
Let’s also examine hedge fund activity in other stocks similar to Avista Corp (NYSE:AVA). These stocks are Uniti Group Inc. (NASDAQ:UNIT), Senior Housing Properties Trust (NYSE:SNH), Adtalem Global Education Inc. (NYSE:ATGE), and Taubman Centers, Inc. (NYSE:TCO). This group of stocks’ market caps match AVA’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| UNIT | 14 | 218877 | 0 |
| SNH | 21 | 84531 | 8 |
| ATGE | 20 | 177763 | 4 |
| TCO | 20 | 170900 | 0 |
| Average | 18.75 | 163018 | 3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.75 hedge funds with bullish positions and the average amount invested in these stocks was $163 million. That figure was $266 million in AVA’s case. Senior Housing Properties Trust (NYSE:SNH) is the most popular stock in this table. On the other hand Uniti Group Inc. (NASDAQ:UNIT) is the least popular one with only 14 bullish hedge fund positions. Avista Corp (NYSE:AVA) 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. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately AVA wasn’t nearly as popular as these 15 stock (hedge fund sentiment was quite bearish); AVA investors were disappointed as the stock returned -0.9% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.
