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Is Avaya Holdings Corp. (AVYA) Going to Burn These Hedge Funds?

Nina Todic

Like everyone else, elite investors make mistakes. Some of their top consensus picks, such as Amazon, Facebook and Alibaba, have not done well in October due to various reasons. Nevertheless, the data show elite investors' consensus picks have done well on average over the long-term. The top 30 S&P 500 stocks among hedge funds at the end of September 2018 returned an average of 6.7% through November 15th whereas the S&P 500 Index ETF gained only 2.6% during the same period. Because their consensus picks have done well, we pay attention to what elite funds think before doing extensive research on a stock. In this article, we take a closer look at Avaya Holdings Corp. (NYSE:AVYA) from the perspective of those elite funds.

Hedge fund interest in Avaya Holdings Corp. (NYSE:AVYA) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare AVYA to other stocks including Chart Industries, Inc. (NASDAQ:GTLS), DiamondRock Hospitality Company (NYSE:DRH), and Federated Investors Inc (NYSE:FII) to get a better sense of its popularity.

At the moment there are numerous methods shareholders put to use to assess stocks. A duo of the best methods are hedge fund and insider trading activity. We have shown that, historically, those who follow the best picks of the best fund managers can beat the S&P 500 by a very impressive margin (see the details here).

Steve Cohen SAC CAPITAL ADVISORS

Let's take a peek at the recent hedge fund action encompassing Avaya Holdings Corp. (NYSE:AVYA).

What does the smart money think about Avaya Holdings Corp. (NYSE:AVYA)?

At Q3's end, a total of 34 of the hedge funds tracked by Insider Monkey held long positions in this stock, no change from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards AVYA over the last 13 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with AVYA Positions

Of the funds tracked by Insider Monkey, Anchorage Advisors, managed by Kevin Michael Ulrich and Anthony Davis, holds the largest position in Avaya Holdings Corp. (NYSE:AVYA). Anchorage Advisors has a $74.2 million position in the stock, comprising 0.5% of its 13F portfolio. Sitting at the No. 2 spot is Highland Capital Management, led by James Dondero, holding a $71.8 million position; 4% of its 13F portfolio is allocated to the stock. Other members of the smart money with similar optimism consist of Tom Wagner and Ara Cohen's Knighthead Capital, David Rosen's Rubric Capital Management and Steve Cohen's Point72 Asset Management.

Judging by the fact that Avaya Holdings Corp. (NYSE:AVYA) has experienced bearish sentiment from hedge fund managers, we can see that there lies a certain "tier" of funds that decided to sell off their full holdings by the end of the third quarter. At the top of the heap, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital said goodbye to the biggest stake of the "upper crust" of funds watched by Insider Monkey, worth close to $21.7 million in stock, and John Orrico's Water Island Capital was right behind this move, as the fund sold off about $8.2 million worth. These bearish behaviors are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let's also examine hedge fund activity in other stocks similar to Avaya Holdings Corp. (NYSE:AVYA). We will take a look at Chart Industries, Inc. (NASDAQ:GTLS), DiamondRock Hospitality Company (NYSE:DRH), Federated Investors Inc (NYSE:FII), and Piedmont Office Realty Trust, Inc. (NYSE:PDM). This group of stocks' market values are closest to AVYA's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GTLS,18,158921,2 DRH,9,90417,-4 FII,15,142997,-4 PDM,10,144868,-1 Average,13,134301,-1.75 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $134 million. That figure was $588 million in AVYA's case. Chart Industries, Inc. (NASDAQ:GTLS) is the most popular stock in this table. On the other hand DiamondRock Hospitality Company (NYSE:DRH) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Avaya Holdings Corp. (NYSE:AVYA) 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.

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