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Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren't timid and registered double digit market beating gains. Financials, energy and industrial stocks aren't doing great but many of the stocks that delivered strong returns since March are still going very strong and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment to Avista Corp (NYSE:AVA) changed recently.
Is AVA a good stock to buy? Avista Corp (NYSE:AVA) was in 20 hedge funds' portfolios at the end of September. The all time high for this statistic is 21. AVA shareholders have witnessed a decrease in activity from the world's largest hedge funds in recent months. There were 21 hedge funds in our database with AVA holdings at the end of June. Our calculations also showed that AVA isn't among the 30 most popular stocks among hedge funds (click for Q3 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.
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' 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 66 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.
Michael Gelband of ExodusPoint Capital
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Now let's check out the key hedge fund action regarding Avista Corp (NYSE:AVA).
Do Hedge Funds Think AVA Is A Good Stock To Buy Now?
At third quarter's end, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a change of -5% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards AVA over the last 21 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Avista Corp (NYSE:AVA) was held by Renaissance Technologies, which reported holding $63 million worth of stock at the end of September. It was followed by Holocene Advisors with a $2.4 million position. Other investors bullish on the company included Citadel Investment Group, ExodusPoint Capital, and Tudor Investment Corp. In terms of the portfolio weights assigned to each position TwinBeech Capital allocated the biggest weight to Avista Corp (NYSE:AVA), around 0.08% of its 13F portfolio. Neo Ivy Capital is also relatively very bullish on the stock, earmarking 0.07 percent of its 13F equity portfolio to AVA.
Judging by the fact that Avista Corp (NYSE:AVA) has faced declining sentiment from the aggregate hedge fund industry, it's easy to see that there exists a select few hedgies who sold off their entire stakes heading into Q4. At the top of the heap, Israel Englander's Millennium Management said goodbye to the biggest position of the 750 funds monitored by Insider Monkey, comprising about $2.8 million in stock. David Harding's fund, Winton Capital Management, also sold off its stock, about $2.2 million worth. These moves are interesting, as aggregate hedge fund interest was cut by 1 funds heading into Q4.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Avista Corp (NYSE:AVA) but similarly valued. We will take a look at Fabrinet (NYSE:FN), Trinity Industries, Inc. (NYSE:TRN), Nelnet, Inc. (NYSE:NNI), Wintrust Financial Corporation (NASDAQ:WTFC), Revolution Medicines, Inc. (NASDAQ:RVMD), Mercury General Corporation (NYSE:MCY), and TreeHouse Foods Inc. (NYSE:THS). This group of stocks' market values are closest to AVA's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FN,17,74880,-6 TRN,23,766000,-2 NNI,13,133382,1 WTFC,20,113331,-3 RVMD,15,371222,2 MCY,21,152030,4 THS,30,189124,-2 Average,19.9,257138,-0.9 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.9 hedge funds with bullish positions and the average amount invested in these stocks was $257 million. That figure was $75 million in AVA's case. TreeHouse Foods Inc. (NYSE:THS) is the most popular stock in this table. On the other hand Nelnet, Inc. (NYSE:NNI) is the least popular one with only 13 bullish hedge fund positions. Avista Corp (NYSE:AVA) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for AVA is 53.2. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. Hedge funds were also right about betting on AVA as the stock returned 15.9% since the end of Q3 (through 12/14) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.