The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 821 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of March 31st, 2020. In this article we are going to take a look at 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. 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 Ring Energy Inc (NYSE:REI), Elevate Credit, Inc. (NYSE:ELVT), and Performant Financial Corp (NASDAQ:PFMT) to gather more data points. Our calculations also showed that AVNW isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
Video: 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 S&P 500 ETFs by more than 58 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. 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.
Warren Lichtenstein of Steel Partners
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s take a peek at the new hedge fund action encompassing Aviat Networks Inc (NASDAQ:AVNW).
How have hedgies been trading Aviat Networks Inc (NASDAQ:AVNW)?
Heading into the second quarter of 2020, 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 18 quarters. With hedgies’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).
More specifically, Steel Partners was the largest shareholder of Aviat Networks Inc (NASDAQ:AVNW), with a stake worth $5.7 million reported as of the end of September. Trailing Steel Partners was Renaissance Technologies, which amassed a stake valued at $2.4 million. Royce & Associates, Ancora Advisors, and Springbok Capital 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 Steel Partners allocated the biggest weight to Aviat Networks Inc (NASDAQ:AVNW), around 2.9% of its 13F portfolio. Ancora Advisors is also relatively very bullish on the stock, earmarking 0.04 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 first 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 review hedge fund activity in other stocks similar to Aviat Networks Inc (NASDAQ:AVNW). We will take a look at Ring Energy Inc (NYSE:REI), Elevate Credit, Inc. (NYSE:ELVT), Performant Financial Corp (NASDAQ:PFMT), and Milestone Pharmaceuticals Inc. (NASDAQ:MIST). This group of stocks’ market caps are similar to AVNW’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| REI | 6 | 596 | -4 |
| ELVT | 12 | 3291 | 1 |
| PFMT | 3 | 12188 | -1 |
| MIST | 5 | 958 | -2 |
| Average | 6.5 | 4258 | -1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 6.5 hedge funds with bullish positions and the average amount invested in these stocks was $4 million. That figure was $10 million in AVNW’s case. Elevate Credit, Inc. (NYSE:ELVT) is the most popular stock in this table. On the other hand Performant Financial Corp (NASDAQ:PFMT) is the least popular one with only 3 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 calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May and still beat the market by 13.2 percentage points. A small number of hedge funds were also right about betting on AVNW as the stock returned 79.3% during the second quarter and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
