Should You Buy Avnet, Inc. (AVT)?

At Insider Monkey, we pore over the filings of more than 700 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of September 30. In this article, we will use that wealth of knowledge to determine whether or not Avnet, Inc. (NYSE:AVT) makes for a good investment right now.

Avnet, Inc. (NYSE:AVT) investors should be aware of an increase in hedge fund sentiment of late. AVT was in 26 hedge funds’ portfolios at the end of September. There were 22 hedge funds in our database with AVT holdings at the end of the previous quarter. At the end of this article we will also compare AVT to other stocks including Reliance Steel & Aluminum (NYSE:RS), US Foods Holding Corp(NYSE:USFD), and W.R. Grace & Co. (NYSE:GRA) to get a better sense of its popularity.

We care about hedge fund sentiment because historically hedge funds’ stock picks delivered strong risk adjusted returns. There are certain segments of the market where hedge funds’ stock picks performed much better than its benchmarks. For instance, the 30 most popular mid-cap stocks among the best performing hedge funds returned 18% over the last 12 months outpacing S&P 500 Index by more than 10 percentage points. We developed this strategy 2.5 years ago and started sharing its picks in our quarterly newsletter. It bested the S&P 500 Index ETFs by delivering a solid 39% vs. 22% gain for its benchmarks.

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What have hedge funds been doing with Avnet, Inc. (NYSE:AVT)?

Heading into the fourth quarter of 2016, a total of 26 of the hedge funds tracked by Insider Monkey were long this stock, up by 18% from the second quarter of 2016. By comparison, 25 hedge funds held shares or bullish call options in AVT heading into this year. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Pzena Investment Management, led by Richard S. Pzena, holds the biggest position in Avnet, Inc. (NYSE:AVT). Pzena Investment Management has a $188.3 million position in the stock, comprising 1.2% of its 13F portfolio. On Pzena Investment Management’s heels is Blue Harbour Group, led by Clifton S. Robbins, which holds a $183.8 million position; 6.8% of its 13F portfolio is allocated to the stock. Remaining members of the smart money that hold long positions encompass Ken Griffin’s Citadel Investment Group, Cliff Asness’ AQR Capital Management and Robert Rodriguez and Steven Romick’s First Pacific Advisors LLC. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

As one would reasonably expect, specific money managers have been driving this bullishness. Jim Simons’ Renaissance Technologies established the most valuable position in Avnet, Inc. (NYSE:AVT). Renaissance Technologies had $15.2 million invested in the company at the end of the quarter. David Harding’s Winton Capital Management also made a $8.1 million investment in the stock during the quarter. The other funds with new positions in the stock are Steve Cohen’s Point72 Asset Management, D. E. Shaw’s D E Shaw, and Ken Griffin’s Citadel Investment Group.

Let’s also examine hedge fund activity in other stocks similar to Avnet, Inc. (NYSE:AVT). These stocks are Reliance Steel & Aluminum (NYSE:RS), US Foods Holding Corp(NYSE:USFD), W.R. Grace & Co. (NYSE:GRA), and WellCare Health Plans, Inc. (NYSE:WCG). All of these stocks’ market caps are closest to AVT’s market cap.

As you can see these stocks had an average of 29 hedge funds with bullish positions and the average amount invested in these stocks was $729 million. That figure was $743 million in AVT’s case. W.R. Grace & Co. (NYSE:GRA) is the most popular stock in this table. On the other hand Reliance Steel & Aluminum (NYSE:RS) is the least popular one with only 22 bullish hedge fund positions. Avnet, Inc. (NYSE:AVT) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard GRA might be a better candidate to consider taking a long position in.

Disclosure: None