We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Avista Corp (NYSE:AVA).
Avista Corp (NYSE:AVA) shareholders have witnessed an increase in support from the world’s most elite money managers of late. AVA was in 15 hedge funds’ portfolios at the end of the third quarter of 2019. There were 11 hedge funds in our database with AVA positions at the end of the previous quarter. Our calculations also showed that AVA 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.
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 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.
David Harding of Winton Capital Management
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. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. Let’s review the latest hedge fund action surrounding Avista Corp (NYSE:AVA).
What does smart money think about Avista Corp (NYSE:AVA)?
At Q3’s end, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 36% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards AVA over the last 17 quarters. With hedge funds’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
The largest stake in Avista Corp (NYSE:AVA) was held by Renaissance Technologies, which reported holding $102.8 million worth of stock at the end of September. It was followed by D E Shaw with a $12.1 million position. Other investors bullish on the company included GLG Partners, Holocene Advisors, and AQR Capital Management. In terms of the portfolio weights assigned to each position Renaissance Technologies allocated the biggest weight to Avista Corp (NYSE:AVA), around 0.09% of its 13F portfolio. GLG Partners is also relatively very bullish on the stock, earmarking 0.04 percent of its 13F equity portfolio to AVA.
As industrywide interest jumped, key money managers have been driving this bullishness. Balyasny Asset Management, managed by Dmitry Balyasny, initiated the most outsized position in Avista Corp (NYSE:AVA). Balyasny Asset Management had $1.2 million invested in the company at the end of the quarter. Benjamin A. Smith’s Laurion Capital Management also initiated a $0.3 million position during the quarter. The other funds with new positions in the stock are David Harding’s Winton Capital Management and Ken Griffin’s Citadel Investment Group.
Let’s check out hedge fund activity in other stocks similar to Avista Corp (NYSE:AVA). These stocks are BankUnited, Inc. (NYSE:BKU), Nektar Therapeutics (NASDAQ:NKTR), Evercore Inc. (NYSE:EVR), and RH (NYSE:RH). All of these stocks’ market caps are similar to AVA’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BKU | 21 | 420103 | 2 |
| NKTR | 17 | 154689 | -2 |
| EVR | 29 | 339572 | 3 |
| RH | 32 | 876978 | 4 |
| Average | 24.75 | 447836 | 1.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.75 hedge funds with bullish positions and the average amount invested in these stocks was $448 million. That figure was $138 million in AVA’s case. RH (NYSE:RH) is the most popular stock in this table. On the other hand Nektar Therapeutics (NASDAQ:NKTR) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks Avista Corp (NYSE:AVA) is even less popular than NKTR. Hedge funds dodged a bullet by taking a bearish stance towards AVA. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately AVA wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); AVA investors were disappointed as the stock returned -1.6% during the fourth quarter (through the end of November) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market so far in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
