Is Avnet, Inc. (NASDAQ:AVT) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.
Avnet, Inc. (NASDAQ:AVT) was in 17 hedge funds' portfolios at the end of March. AVT has seen a decrease in activity from the world's largest hedge funds of late. There were 24 hedge funds in our database with AVT holdings at the end of the previous quarter. Our calculations also showed that AVT isn't among the 30 most popular stocks among hedge funds.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 market by 40 percentage points since May 2014 through May 30, 2019 (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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
Let's analyze the key hedge fund action regarding Avnet, Inc. (NASDAQ:AVT).
What have hedge funds been doing with Avnet, Inc. (NASDAQ:AVT)?
At Q1's end, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -29% from one quarter earlier. On the other hand, there were a total of 14 hedge funds with a bullish position in AVT a year ago. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Pzena Investment Management, managed by Richard S. Pzena, holds the number one position in Avnet, Inc. (NASDAQ:AVT). Pzena Investment Management has a $326.3 million position in the stock, comprising 1.8% of its 13F portfolio. Sitting at the No. 2 spot is AQR Capital Management, led by Cliff Asness, holding a $81.4 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Remaining members of the smart money with similar optimism encompass Alexander Roepers's Atlantic Investment Management, Bernard Horn's Polaris Capital Management and Ric Dillon's Diamond Hill Capital.
Since Avnet, Inc. (NASDAQ:AVT) has faced declining sentiment from the aggregate hedge fund industry, logic holds that there exists a select few hedge funds who sold off their entire stakes in the third quarter. Intriguingly, Jim Simons's Renaissance Technologies dropped the biggest position of the 700 funds tracked by Insider Monkey, totaling an estimated $7.5 million in stock. Peter Rathjens, Bruce Clarke and John Campbell's fund, Arrowstreet Capital, also sold off its stock, about $6.5 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest dropped by 7 funds in the third quarter.
Let's also examine hedge fund activity in other stocks similar to Avnet, Inc. (NASDAQ:AVT). We will take a look at Turkcell Iletisim Hizmetleri A.S. (NYSE:TKC), LivaNova PLC (NASDAQ:LIVN), MGIC Investment Corporation (NYSE:MTG), and ViaSat, Inc. (NASDAQ:VSAT). This group of stocks' market values match AVT's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TKC,7,8792,-2 LIVN,20,262833,-2 MTG,32,392959,-3 VSAT,22,2119384,3 Average,20.25,695992,-1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.25 hedge funds with bullish positions and the average amount invested in these stocks was $696 million. That figure was $586 million in AVT's case. MGIC Investment Corporation (NYSE:MTG) is the most popular stock in this table. On the other hand Turkcell Iletisim Hizmetleri A.S. (NYSE:TKC) is the least popular one with only 7 bullish hedge fund positions. Avnet, Inc. (NASDAQ: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. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately AVT wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); AVT investors were disappointed as the stock returned 1.4% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.