Is AVB Stock A Buy or Sell?

Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don’t make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards AvalonBay Communities Inc (NYSE:AVB) to find out whether there were any major changes in hedge funds’ views.

Is AVB stock a buy? AvalonBay Communities Inc (NYSE:AVB) investors should pay attention to an increase in enthusiasm from smart money in recent months. AvalonBay Communities Inc (NYSE:AVB) was in 32 hedge funds’ portfolios at the end of December. The all time high for this statistic is 34. There were 29 hedge funds in our database with AVB positions at the end of the third quarter. Our calculations also showed that AVB isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

In the 21st century investor’s toolkit there are several tools stock market investors can use to assess publicly traded companies. Some of the less known tools are hedge fund and insider trading moves. Our experts have shown that, historically, those who follow the top picks of the top fund managers can outpace their index-focused peers by a superb amount (see the details here).

Andreas Halvorsen of Viking Global

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the CBD market is growing at a 33% annualized rate, so we are taking a closer look at this under-the-radar hemp stock. We go through lists like the 10 best biotech stocks under $10 to identify the next stock with 10x upside potential. 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 website. Keeping this in mind let’s view the recent hedge fund action encompassing AvalonBay Communities Inc (NYSE:AVB).

Do Hedge Funds Think AVB Is A Good Stock To Buy Now?

Heading into the first quarter of 2021, a total of 32 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 10% from the previous quarter. The graph below displays the number of hedge funds with bullish position in AVB over the last 22 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).

Among these funds, Long Pond Capital held the most valuable stake in AvalonBay Communities Inc (NYSE:AVB), which was worth $277.2 million at the end of the fourth quarter. On the second spot was Viking Global which amassed $194.1 million worth of shares. D1 Capital Partners, Angelo Gordon & Co, and D E Shaw were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Long Pond Capital allocated the biggest weight to AvalonBay Communities Inc (NYSE:AVB), around 9.26% of its 13F portfolio. Masterton Capital Management is also relatively very bullish on the stock, designating 5.09 percent of its 13F equity portfolio to AVB.

Now, specific money managers were breaking ground themselves. King Street Capital, managed by Brian J. Higgins, established the most valuable position in AvalonBay Communities Inc (NYSE:AVB). King Street Capital had $10.4 million invested in the company at the end of the quarter. Stephen Mykijewycz’s Masterton Capital Management also made a $6.4 million investment in the stock during the quarter. The other funds with brand new AVB positions are Aaron Wertentheil’s Jones Road Capital Management, Paul Tudor Jones’s Tudor Investment Corp, and Michael Gelband’s ExodusPoint Capital.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as AvalonBay Communities Inc (NYSE:AVB) but similarly valued. We will take a look at China Telecom Corporation Limited (NYSE:CHA), Enphase Energy Inc (NASDAQ:ENPH), Equity Residential (NYSE:EQR), Arista Networks Inc (NYSE:ANET), Nokia Corporation (NYSE:NOK), W.W. Grainger, Inc. (NYSE:GWW), and XP Inc. (NASDAQ:XP). This group of stocks’ market valuations are closest to AVB’s market valuation.

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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 $447 million. That figure was $864 million in AVB’s case. Enphase Energy Inc (NASDAQ:ENPH) is the most popular stock in this table. On the other hand China Telecom Corporation Limited (NYSE:CHA) is the least popular one with only 5 bullish hedge fund positions. AvalonBay Communities Inc (NYSE:AVB) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for AVB is 67.6. 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. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.2% in 2021 through April 12th and still beat the market by 1.5 percentage points. Hedge funds were also right about betting on AVB as the stock returned 17.6% since the end of Q4 (through 4/12) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

Disclosure: None. This article was originally published at Insider Monkey.

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