Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Keeping this in mind, let’s analyze whether Avnet, Inc. (NYSE:AVT) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market when we factor in known risk factors.
Avnet, Inc. (NYSE:AVT) was in 33 hedge funds’ portfolios at the end of the fourth quarter of 2019. AVT investors should be aware of an increase in activity from the world’s largest hedge funds of late. There were 31 hedge funds in our database with AVT positions at the end of the previous quarter. Our calculations also showed that AVT isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
In the 21st century investor’s toolkit there are tons of formulas shareholders use to analyze stocks. Two of the most useful formulas are hedge fund and insider trading moves. Our experts have shown that, historically, those who follow the top picks of the best money managers can outclass the broader indices by a healthy amount (see the details here).
Cliff Asness of AQR Capital Management
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to check out the new hedge fund action regarding Avnet, Inc. (NYSE:AVT).
What does smart money think about Avnet, Inc. (NYSE:AVT)?
Heading into the first quarter of 2020, a total of 33 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 6% from the previous quarter. By comparison, 24 hedge funds held shares or bullish call options in AVT a year ago. With the smart money’s capital changing hands, there exists a few noteworthy hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).
The largest stake in Avnet, Inc. (NYSE:AVT) was held by Pzena Investment Management, which reported holding $381.8 million worth of stock at the end of September. It was followed by AQR Capital Management with a $155.6 million position. Other investors bullish on the company included Renaissance Technologies, Polaris Capital Management, and Arrowstreet Capital. In terms of the portfolio weights assigned to each position Polaris Capital Management allocated the biggest weight to Avnet, Inc. (NYSE:AVT), around 1.9% of its 13F portfolio. Pzena Investment Management is also relatively very bullish on the stock, dishing out 1.78 percent of its 13F equity portfolio to AVT.
As aggregate interest increased, key hedge funds have jumped into Avnet, Inc. (NYSE:AVT) headfirst. Weld Capital Management, managed by Minhua Zhang, established the largest position in Avnet, Inc. (NYSE:AVT). Weld Capital Management had $2.5 million invested in the company at the end of the quarter. Lee Ainslie’s Maverick Capital also initiated a $2.3 million position during the quarter. The other funds with brand new AVT positions are Michael Gelband’s ExodusPoint Capital, Jinghua Yan’s TwinBeech Capital, and Qing Li’s Sciencast Management.
Let’s check out hedge fund activity in other stocks similar to Avnet, Inc. (NYSE:AVT). We will take a look at Perspecta Inc. (NYSE:PRSP), YY Inc (NASDAQ:YY), Angie’s List Inc (NASDAQ:ANGI), and Sterling Bancorp (NYSE:STL). This group of stocks’ market valuations are similar to AVT’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PRSP | 46 | 598714 | 3 |
| YY | 23 | 143195 | 6 |
| ANGI | 23 | 386770 | 0 |
| STL | 30 | 337941 | 5 |
| Average | 30.5 | 366655 | 3.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 30.5 hedge funds with bullish positions and the average amount invested in these stocks was $367 million. That figure was $856 million in AVT’s case. Perspecta Inc. (NYSE:PRSP) is the most popular stock in this table. On the other hand YY Inc (NASDAQ:YY) is the least popular one with only 23 bullish hedge fund positions. Avnet, Inc. (NYSE:AVT) is not the most popular stock in this group but hedge fund interest is still above average. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but beat the market by 5.5 percentage points. Unfortunately AVT wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on AVT were disappointed as the stock returned -40.3% during the same time period 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 so far this year.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
