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 Aviat Networks Inc (NASDAQ:AVNW).
Hedge fund interest in Aviat Networks Inc (NASDAQ:AVNW) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that AVNW isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as ObsEva SA (NASDAQ:OBSV), County Bancorp, Inc. (NASDAQ:ICBK), and Ardmore Shipping Corp (NYSE:ASC) to gather more data points.
Video: Watch our video about the top 5 most popular hedge fund stocks.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 S&P 500 ETFs by 66 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 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.
Gavin Saitowitz of Prelude Capital
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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. With all of this in mind we’re going to take a glance at the recent hedge fund action regarding Aviat Networks Inc (NASDAQ:AVNW).
What have hedge funds been doing with Aviat Networks Inc (NASDAQ:AVNW)?
At third quarter’s end, a total of 5 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. The graph below displays the number of hedge funds with bullish position in AVNW over the last 21 quarters. With hedgies’ capital changing hands, there exists a few noteworthy hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).
The largest stake in Aviat Networks Inc (NASDAQ:AVNW) was held by Steel Partners, which reported holding $14.7 million worth of stock at the end of September. It was followed by Royce & Associates with a $5.9 million position. Other investors bullish on the company included Renaissance Technologies, Ancora Advisors, and Springbok Capital. In terms of the portfolio weights assigned to each position Steel Partners allocated the biggest weight to Aviat Networks Inc (NASDAQ:AVNW), around 7.57% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, dishing out 0.06 percent of its 13F equity portfolio to AVNW.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren’t any hedge funds dumping their holdings during the third quarter, there weren’t any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven’t identified any viable catalysts that can attract investor attention.
Let’s now take a look at hedge fund activity in other stocks similar to Aviat Networks Inc (NASDAQ:AVNW). These stocks are ObsEva SA (NASDAQ:OBSV), County Bancorp, Inc. (NASDAQ:ICBK), Ardmore Shipping Corp (NYSE:ASC), Catabasis Pharmaceuticals Inc (NASDAQ:CATB), LEAP THERAPEUTICS, INC. (NASDAQ:LPTX), First Guaranty Bancshares, Inc. (NASDAQ:FGBI), and Champions Oncology, Inc. (NASDAQ:CSBR). All of these stocks’ market caps are closest to AVNW’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| OBSV | 6 | 17950 | -5 |
| ICBK | 3 | 3672 | -1 |
| ASC | 12 | 12907 | 0 |
| CATB | 6 | 3401 | -2 |
| LPTX | 12 | 34432 | -4 |
| FGBI | 1 | 328 | -1 |
| CSBR | 2 | 2533 | 1 |
| Average | 6 | 10746 | -1.7 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 6 hedge funds with bullish positions and the average amount invested in these stocks was $11 million. That figure was $28 million in AVNW’s case. Ardmore Shipping Corp (NYSE:ASC) is the most popular stock in this table. On the other hand First Guaranty Bancshares, Inc. (NASDAQ:FGBI) is the least popular one with only 1 bullish hedge fund positions. Aviat Networks Inc (NASDAQ:AVNW) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for AVNW is 44.6. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through November 27th and still beat the market by 16.1 percentage points. A small number of hedge funds were also right about betting on AVNW as the stock returned 62.7% since the end of the third quarter (through 11/27) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
