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. We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Peltz’s recent General Electric losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards AVX Corporation (NYSE:AVX).
Is AVX Corporation (NYSE:AVX) the right pick for your portfolio? Prominent investors are in a bullish mood. The number of bullish hedge fund bets improved by 1 lately. Our calculations also showed that AVX 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In the eyes of most traders, hedge funds are perceived as unimportant, outdated financial tools of the past. While there are greater than 8000 funds with their doors open at present, Our experts hone in on the top tier of this group, about 850 funds. These hedge fund managers handle most of all hedge funds’ total asset base, and by tracking their best stock picks, Insider Monkey has figured out a few investment strategies that have historically surpassed the market. Insider Monkey’s flagship short hedge fund strategy defeated the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 35.3% since February 2017 (through March 3rd) even though the market was up more than 35% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
Chuck Royce of Royce & Associates
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. Keeping this in mind let’s check out the latest hedge fund action regarding AVX Corporation (NYSE:AVX).
How are hedge funds trading AVX Corporation (NYSE:AVX)?
At the end of the fourth quarter, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 8% from the third quarter of 2019. On the other hand, there were a total of 16 hedge funds with a bullish position in AVX a year ago. With hedge funds’ sentiment swirling, there exists a select group of notable hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Royce & Associates, managed by Chuck Royce, holds the number one position in AVX Corporation (NYSE:AVX). Royce & Associates has a $71.1 million position in the stock, comprising 0.6% of its 13F portfolio. The second most bullish fund manager is Citadel Investment Group, led by Ken Griffin, holding a $14.1 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Remaining hedge funds and institutional investors with similar optimism contain Mario Gabelli’s GAMCO Investors, David Harding’s Winton Capital Management and Dmitry Balyasny’s Balyasny Asset Management. In terms of the portfolio weights assigned to each position Royce & Associates allocated the biggest weight to AVX Corporation (NYSE:AVX), around 0.63% of its 13F portfolio. Centiva Capital is also relatively very bullish on the stock, designating 0.08 percent of its 13F equity portfolio to AVX.
As industrywide interest jumped, specific money managers have been driving this bullishness. GAMCO Investors, managed by Mario Gabelli, established the most valuable position in AVX Corporation (NYSE:AVX). GAMCO Investors had $4 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also made a $2.6 million investment in the stock during the quarter. The following funds were also among the new AVX investors: Israel Englander’s Millennium Management, Karim Abbadi and Edward McBride’s Centiva Capital, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as AVX Corporation (NYSE:AVX) but similarly valued. We will take a look at TopBuild Corp (NYSE:BLD), MFA Financial, Inc. (NYSE:MFA), Rexnord Corp (NYSE:RXN), and Viavi Solutions Inc (NASDAQ:VIAV). This group of stocks’ market values match AVX’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BLD | 29 | 177380 | 8 |
| MFA | 19 | 84511 | 0 |
| RXN | 25 | 334197 | 3 |
| VIAV | 37 | 420718 | 2 |
| Average | 27.5 | 254202 | 3.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 27.5 hedge funds with bullish positions and the average amount invested in these stocks was $254 million. That figure was $103 million in AVX’s case. Viavi Solutions Inc (NASDAQ:VIAV) is the most popular stock in this table. On the other hand MFA Financial, Inc. (NYSE:MFA) is the least popular one with only 19 bullish hedge fund positions. Compared to these stocks AVX Corporation (NYSE:AVX) is even less popular than MFA. Hedge funds clearly dropped the ball on AVX as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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 still beat the market by 5.5 percentage points. A small number of hedge funds were also right about betting on AVX as the stock returned 6.7% during the same time period and outperformed the market by an even larger margin.
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.
