Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of June. At Insider Monkey, we follow nearly 750 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Avery Dennison Corporation (NYSE:AVY), so let’s take a closer look at the sentiment that surrounds it in the current quarter.
Avery Dennison Corporation (NYSE:AVY) has seen an increase in hedge fund sentiment lately. AVY was in 22 hedge funds’ portfolios at the end of the third quarter of 2019. There were 21 hedge funds in our database with AVY positions 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 Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
James Dondero of Highland Capital Management
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. Let’s take a look at the new hedge fund action regarding Avery Dennison Corporation (NYSE:AVY).
Hedge fund activity in Avery Dennison Corporation (NYSE:AVY)
At the end of the third quarter, a total of 22 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 5% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards AVY over the last 17 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Avery Dennison Corporation (NYSE:AVY) was held by Adage Capital Management, which reported holding $34.3 million worth of stock at the end of September. It was followed by AQR Capital Management with a $25.6 million position. Other investors bullish on the company included Millennium Management, Marshall Wace, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Quantinno Capital allocated the biggest weight to Avery Dennison Corporation (NYSE:AVY), around 0.34% of its 13F portfolio. Bailard Inc is also relatively very bullish on the stock, dishing out 0.26 percent of its 13F equity portfolio to AVY.
Now, specific money managers were breaking ground themselves. Laurion Capital Management, managed by Benjamin A. Smith, created the biggest position in Avery Dennison Corporation (NYSE:AVY). Laurion Capital Management had $1.1 million invested in the company at the end of the quarter. John Overdeck and David Siegel’s Two Sigma Advisors also made a $1.1 million investment in the stock during the quarter. The following funds were also among the new AVY investors: James Dondero’s Highland Capital Management, Mike Vranos’s Ellington, and Matthew Tewksbury’s Stevens Capital Management.
Let’s now take a look at hedge fund activity in other stocks similar to Avery Dennison Corporation (NYSE:AVY). These stocks are Vereit Inc (NYSE:VER), ASE Technology Holding Co., Ltd. (NYSE:ASX), Galapagos NV (NASDAQ:GLPG), and PerkinElmer, Inc. (NYSE:PKI). 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 |
|---|---|---|---|
| VER | 34 | 613230 | 11 |
| ASX | 8 | 192875 | 0 |
| GLPG | 13 | 142930 | -1 |
| PKI | 24 | 975011 | 0 |
| Average | 19.75 | 481012 | 2.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.75 hedge funds with bullish positions and the average amount invested in these stocks was $481 million. That figure was $126 million in AVY’s case. Vereit Inc (NYSE:VER) is the most popular stock in this table. On the other hand ASE Technology Holding Co., Ltd. (NYSE:ASX) is the least popular one with only 8 bullish hedge fund positions. Avery Dennison Corporation (NYSE:AVY) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on AVY as the stock returned 14.8% during the fourth quarter (through the end of November) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.
