Amid an overall market correction, many stocks that smart money investors were collectively bullish on tanked during the fourth quarter. Among them, Amazon and Netflix ranked among the top 30 picks and both lost around 20%. Facebook, which was the second most popular stock, lost 14% amid uncertainty regarding the interest rates and tech valuations. Nevertheless, our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.
Hedge fund interest in Avon Products, Inc. (NYSE:AVP) shares was flat at the end of last quarter. This is usually a negative indicator. 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 Movado Group, Inc (NYSE:MOV), MBIA Inc. (NYSE:MBI), and Aptinyx Inc. (NASDAQ:APTX) to gather more data points.
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’ 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 market by 18 percentage points since May 2014 through December 3, 2018 (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 24% through December 3, 2018. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We’re going to check out the latest hedge fund action surrounding Avon Products, Inc. (NYSE:AVP).
What have hedge funds been doing with Avon Products, Inc. (NYSE:AVP)?
At Q3’s end, a total of 26 of the hedge funds tracked by Insider Monkey held long positions in this stock, representing no change from the previous quarter. The graph below displays the number of hedge funds with bullish position in AVP over the last 13 quarters. With hedge funds’ sentiment swirling, there exists a few noteworthy hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).
More specifically, Yacktman Asset Management was the largest shareholder of Avon Products, Inc. (NYSE:AVP), with a stake worth $41.5 million reported as of the end of September. Trailing Yacktman Asset Management was Renaissance Technologies, which amassed a stake valued at $31.3 million. Archon Capital Management, Shah Capital Management, and Arrowstreet Capital were also very fond of the stock, giving the stock large weights in their portfolios.
Since Avon Products, Inc. (NYSE:AVP) has faced falling interest from the entirety of the hedge funds we track, logic holds that there is a sect of hedge funds that decided to sell off their full holdings last quarter. Interestingly, Paul Tudor Jones’s Tudor Investment Corp cut the largest investment of the “upper crust” of funds monitored by Insider Monkey, valued at about $0.4 million in stock. Benjamin A. Smith’s fund, Laurion Capital Management, also cut its stock, about $0.1 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s now take a look at hedge fund activity in other stocks similar to Avon Products, Inc. (NYSE:AVP). We will take a look at Movado Group, Inc (NYSE:MOV), MBIA Inc. (NYSE:MBI), Aptinyx Inc. (NASDAQ:APTX), and Hi-Crush Partners LP (NYSE:HCLP). All of these stocks’ market caps match AVP’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MOV | 25 | 83721 | -1 |
| MBI | 19 | 286935 | 0 |
| APTX | 12 | 198713 | -6 |
| HCLP | 4 | 2804 | -4 |
| Average | 15 | 143043 | -2.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $143 million. That figure was $190 million in AVP’s case. Movado Group, Inc (NYSE:MOV) is the most popular stock in this table. On the other hand Hi-Crush Partners LP (NYSE:HCLP) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Avon Products, Inc. (NYSE:AVP) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
Disclosure: None. This article was originally published at Insider Monkey.
