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 AVX Corporation (NYSE:AVX).
Is AVX Corporation (NYSE:AVX) a bargain? Money managers are betting on the stock. The number of long hedge fund bets increased by 2 recently. Our calculations also showed that AVX isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). AVX was in 13 hedge funds’ portfolios at the end of September. There were 11 hedge funds in our database with AVX 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.
Paul Marshall of Marshall Wace
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 recent hedge fund action regarding AVX Corporation (NYSE:AVX).
What have hedge funds been doing with AVX Corporation (NYSE:AVX)?
At Q3’s end, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 18% from one quarter earlier. By comparison, 16 hedge funds held shares or bullish call options in AVX a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were upping their holdings considerably (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Royce & Associates, managed by Chuck Royce, holds the biggest position in AVX Corporation (NYSE:AVX). Royce & Associates has a $54.7 million position in the stock, comprising 0.5% of its 13F portfolio. The second most bullish fund manager is Citadel Investment Group, led by Ken Griffin, holding a $3.3 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other professional money managers that are bullish contain Renaissance Technologies, Paul Marshall and Ian Wace’s Marshall Wace and Ernest Chow and Jonathan Howe’s Sensato Capital Management. In terms of the portfolio weights assigned to each position Zebra Capital Management allocated the biggest weight to AVX Corporation (NYSE:AVX), around 1.66% of its 13F portfolio. Sensato Capital Management is also relatively very bullish on the stock, dishing out 0.6 percent of its 13F equity portfolio to AVX.
Now, specific money managers were breaking ground themselves. Winton Capital Management, managed by David Harding, assembled the largest position in AVX Corporation (NYSE:AVX). Winton Capital Management had $1 million invested in the company at the end of the quarter. Donald Sussman’s Paloma Partners also initiated a $0.2 million position during the quarter. The only other fund with a brand new AVX position is Steve Cohen’s Point72 Asset Management.
Let’s check out hedge fund activity in other stocks similar to AVX Corporation (NYSE:AVX). These stocks are South State Corporation (NASDAQ:SSB), Wingstop Inc (NASDAQ:WING), Spectrum Brands Holdings, Inc. (NYSE:SPB), and California Water Service Group (NYSE:CWT). This group of stocks’ market caps resemble AVX’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SSB | 17 | 30763 | 3 |
| WING | 23 | 301040 | -1 |
| SPB | 34 | 784958 | 10 |
| CWT | 15 | 52003 | 3 |
| Average | 22.25 | 292191 | 3.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.25 hedge funds with bullish positions and the average amount invested in these stocks was $292 million. That figure was $69 million in AVX’s case. Spectrum Brands Holdings, Inc. (NYSE:SPB) is the most popular stock in this table. On the other hand California Water Service Group (NYSE:CWT) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks AVX Corporation (NYSE:AVX) is even less popular than CWT. Hedge funds clearly dropped the ball on AVX as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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. A small number of hedge funds were also right about betting on AVX as the stock returned 34.9% during the fourth quarter (through the end of November) and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
