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. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of March 31st, a week after the market trough. In this article we look at what those investors think of Avaya Holdings Corp. (NYSE:AVYA).
Is Avaya Holdings Corp. (NYSE:AVYA) a buy here? Investors who are in the know are turning less bullish. The number of bullish hedge fund positions went down by 12 in recent months. Our calculations also showed that AVYA 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). AVYA was in 27 hedge funds' portfolios at the end of March. There were 39 hedge funds in our database with AVYA holdings at the end of the previous quarter. 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 was 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_758454" align="aligncenter" width="400"] James Dondero of Highland Capital Management[/caption]
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 we're going to review the latest hedge fund action surrounding Avaya Holdings Corp. (NYSE:AVYA).
Hedge fund activity in Avaya Holdings Corp. (NYSE:AVYA)
Heading into the second quarter of 2020, a total of 27 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -31% from the previous quarter. By comparison, 40 hedge funds held shares or bullish call options in AVYA a year ago. With the smart money's sentiment swirling, there exists a few notable hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).
The largest stake in Avaya Holdings Corp. (NYSE:AVYA) was held by Melqart Asset Management, which reported holding $26.6 million worth of stock at the end of September. It was followed by Highland Capital Management with a $18.8 million position. Other investors bullish on the company included Point72 Asset Management, Arrowstreet Capital, and Armistice Capital. In terms of the portfolio weights assigned to each position Alta Fundamental Advisers allocated the biggest weight to Avaya Holdings Corp. (NYSE:AVYA), around 15.65% of its 13F portfolio. Mariner Investment Group is also relatively very bullish on the stock, setting aside 6.8 percent of its 13F equity portfolio to AVYA.
Seeing as Avaya Holdings Corp. (NYSE:AVYA) has witnessed declining sentiment from the smart money, it's easy to see that there is a sect of hedge funds that elected to cut their entire stakes by the end of the first quarter. Intriguingly, David Rosen's Rubric Capital Management sold off the largest position of all the hedgies tracked by Insider Monkey, comprising about $37.7 million in stock. Scott Kapnick's fund, HPS Investment Partners, also dumped its stock, about $22.3 million worth. These bearish behaviors are important to note, as total hedge fund interest dropped by 12 funds by the end of the first quarter.
Let's now review hedge fund activity in other stocks similar to Avaya Holdings Corp. (NYSE:AVYA). We will take a look at Krystal Biotech, Inc. (NASDAQ:KRYS), Cerus Corporation (NASDAQ:CERS), Teekay Tankers Ltd. (NYSE:TNK), and Oyster Point Pharma, Inc. (NASDAQ:OYST). This group of stocks' market valuations match AVYA's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position KRYS,9,188739,0 CERS,17,105927,5 TNK,21,66975,2 OYST,4,1827,1 Average,12.75,90867,2 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.75 hedge funds with bullish positions and the average amount invested in these stocks was $91 million. That figure was $142 million in AVYA's case. Teekay Tankers Ltd. (NYSE:TNK) is the most popular stock in this table. On the other hand Oyster Point Pharma, Inc. (NASDAQ:OYST) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Avaya Holdings Corp. (NYSE:AVYA) is more popular among hedge funds. 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 returned 8.3% in 2020 through the end of May but still managed to beat the market by 13.2 percentage points. Hedge funds were also right about betting on AVYA as the stock returned 80.5% so far in Q2 (through the end of May) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.