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 Avon Products, Inc. (NYSE:AVP).
Is Avon Products, Inc. (NYSE:AVP) a good investment right now? The smart money is betting on the stock. The number of bullish hedge fund bets improved by 3 in recent months. Our calculations also showed that AVP isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). AVP was in 21 hedge funds’ portfolios at the end of the third quarter of 2019. There were 18 hedge funds in our database with AVP positions at the end of the previous quarter.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Bill Miller of Miller Value Partners
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. We’re going to take a look at the fresh hedge fund action encompassing Avon Products, Inc. (NYSE:AVP).
What have hedge funds been doing with Avon Products, Inc. (NYSE:AVP)?
Heading into the fourth quarter of 2019, a total of 21 of the hedge funds tracked by Insider Monkey were long this stock, a change of 17% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards AVP over the last 17 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
More specifically, Renaissance Technologies was the largest shareholder of Avon Products, Inc. (NYSE:AVP), with a stake worth $104.2 million reported as of the end of September. Trailing Renaissance Technologies was TIG Advisors, which amassed a stake valued at $36.3 million. Miller Value Partners, Odey Asset Management Group, and Barington Capital Group 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 Barington Capital Group allocated the biggest weight to Avon Products, Inc. (NYSE:AVP), around 22.47% of its 13F portfolio. Shah Capital Management is also relatively very bullish on the stock, dishing out 7.52 percent of its 13F equity portfolio to AVP.
As aggregate interest increased, key hedge funds have jumped into Avon Products, Inc. (NYSE:AVP) headfirst. Marshall Wace, managed by Paul Marshall and Ian Wace, assembled the most outsized position in Avon Products, Inc. (NYSE:AVP). Marshall Wace had $10.5 million invested in the company at the end of the quarter. Paul Tudor Jones’s Tudor Investment Corp also made a $5.8 million investment in the stock during the quarter. The following funds were also among the new AVP investors: Michael Gelband’s ExodusPoint Capital, Karim Abbadi and Edward McBride’s Centiva Capital, and Paul Tudor Jones’s Tudor Investment Corp.
Let’s also examine hedge fund activity in other stocks similar to Avon Products, Inc. (NYSE:AVP). These stocks are Cleveland-Cliffs Inc (NYSE:CLF), PennyMac Mortgage Investment Trust (NYSE:PMT), Banner Corporation (NASDAQ:BANR), and JELD-WEN Holding, Inc. (NYSE:JELD). This group of stocks’ market valuations are closest to AVP’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CLF | 26 | 297021 | -2 |
| PMT | 13 | 74959 | -1 |
| BANR | 13 | 78632 | -3 |
| JELD | 14 | 284352 | -2 |
| Average | 16.5 | 183741 | -2 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.5 hedge funds with bullish positions and the average amount invested in these stocks was $184 million. That figure was $315 million in AVP’s case. Cleveland-Cliffs Inc (NYSE:CLF) is the most popular stock in this table. On the other hand PennyMac Mortgage Investment Trust (NYSE:PMT) is the least popular one with only 13 bullish hedge fund positions. Avon Products, Inc. (NYSE:AVP) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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. Unfortunately AVP wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on AVP were disappointed as the stock returned 4.3% 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 many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.
