In this article we will take a look at whether hedge funds think Avery Dennison Corporation (NYSE:AVY) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Avery Dennison Corporation (NYSE:AVY) investors should be aware of a decrease in enthusiasm from smart money in recent months. AVY was in 18 hedge funds’ portfolios at the end of March. There were 22 hedge funds in our database with AVY holdings at the end of the previous quarter. Our calculations also showed that AVY isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 58 percentage points since March 2017 (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 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Noam Gottesman of GLG Partners
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s take a peek at the latest hedge fund action regarding Avery Dennison Corporation (NYSE:AVY).
What does smart money think about Avery Dennison Corporation (NYSE:AVY)?
At the end of the first quarter, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of -18% from the previous quarter. By comparison, 23 hedge funds held shares or bullish call options in AVY a year ago. With hedgies’ sentiment swirling, there exists a few key hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
The largest stake in Avery Dennison Corporation (NYSE:AVY) was held by Millennium Management, which reported holding $25.4 million worth of stock at the end of September. It was followed by AQR Capital Management with a $23.8 million position. Other investors bullish on the company included GLG Partners, Gotham Asset Management, and Two Sigma Advisors. In terms of the portfolio weights assigned to each position Bailard Inc allocated the biggest weight to Avery Dennison Corporation (NYSE:AVY), around 0.34% of its 13F portfolio. Cognios Capital is also relatively very bullish on the stock, setting aside 0.31 percent of its 13F equity portfolio to AVY.
Judging by the fact that Avery Dennison Corporation (NYSE:AVY) has experienced a decline in interest from hedge fund managers, it’s safe to say that there is a sect of fund managers that slashed their entire stakes last quarter. At the top of the heap, Steve Cohen’s Point72 Asset Management sold off the largest position of the “upper crust” of funds monitored by Insider Monkey, worth about $2.6 million in stock, and James Dondero’s Highland Capital Management was right behind this move, as the fund cut about $1.3 million worth. These bearish behaviors are interesting, as total hedge fund interest was cut by 4 funds last quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Avery Dennison Corporation (NYSE:AVY) but similarly valued. We will take a look at Huazhu Group Limited (NASDAQ:HTHT), Molson Coors Beverage Company (NYSE:TAP), Concho Resources Inc. (NYSE:CXO), and Cna Financial Corporation (NYSE:CNA). This group of stocks’ market valuations are similar to AVY’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HTHT | 17 | 255677 | -1 |
| TAP | 34 | 258923 | 3 |
| CXO | 31 | 492191 | -8 |
| CNA | 12 | 51546 | -3 |
| Average | 23.5 | 264584 | -2.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 23.5 hedge funds with bullish positions and the average amount invested in these stocks was $265 million. That figure was $83 million in AVY’s case. Molson Coors Beverage Company (NYSE:TAP) is the most popular stock in this table. On the other hand Cna Financial Corporation (NYSE:CNA) is the least popular one with only 12 bullish hedge fund positions. Avery Dennison Corporation (NYSE:AVY) 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.4% in 2020 through June 22nd and surpassed the market by 15.9 percentage points. Unfortunately AVY wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); AVY investors were disappointed as the stock returned 12.2% during the second 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 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.
