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Should I Buy Activision Blizzard, Inc. (ATVI)?

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  • ATVI

Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that's why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to the smartest analysts and expensive data/information sources that individual investors can't match. So should one consider investing in Activision Blizzard, Inc. (NASDAQ:ATVI)? The smart money sentiment can provide an answer to this question.

Activision Blizzard, Inc. (NASDAQ:ATVI) was in 80 hedge funds' portfolios at the end of the third quarter of 2021. The all time high for this statistic is 101. ATVI has experienced an increase in enthusiasm from smart money of late. There were 78 hedge funds in our database with ATVI holdings at the end of June. Our calculations also showed that ATVI isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Now let's take a look at the recent hedge fund action regarding Activision Blizzard, Inc. (NASDAQ:ATVI).

Gil Simon of SoMa Equity Partners
Gil Simon of SoMa Equity Partners

Gil Simon of SoMa Equity Partners

Do Hedge Funds Think ATVI Is A Good Stock To Buy Now?

Heading into the fourth quarter of 2021, a total of 80 of the hedge funds tracked by Insider Monkey were long this stock, a change of 3% from the second quarter of 2021. On the other hand, there were a total of 93 hedge funds with a bullish position in ATVI a year ago. So, let's see 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, D. E. Shaw's D E Shaw has the most valuable position in Activision Blizzard, Inc. (NASDAQ:ATVI), worth close to $765.3 million, accounting for 0.7% of its total 13F portfolio. The second largest stake is held by Ken Griffin of Citadel Investment Group, with a $460.8 million position; 0.1% of its 13F portfolio is allocated to the company. Other hedge funds and institutional investors that are bullish comprise Panayotis Takis Sparaggis's Alkeon Capital Management, Gil Simon's SoMa Equity Partners and Andrew Immerman and Jeremy Schiffman's Palestra Capital Management. In terms of the portfolio weights assigned to each position 3G Sahana Capital Management allocated the biggest weight to Activision Blizzard, Inc. (NASDAQ:ATVI), around 8.82% of its 13F portfolio. Fernbridge Capital Management is also relatively very bullish on the stock, setting aside 7.19 percent of its 13F equity portfolio to ATVI.

As one would reasonably expect, key money managers were breaking ground themselves. Point72 Asset Management, managed by Steve Cohen, established the largest position in Activision Blizzard, Inc. (NASDAQ:ATVI). Point72 Asset Management had $196.1 million invested in the company at the end of the quarter. Dan Loeb's Third Point also made a $154.8 million investment in the stock during the quarter. The following funds were also among the new ATVI investors: Brandon Haley's Holocene Advisors, Zach Schreiber's Point State Capital, and Andreas Halvorsen's Viking Global.

Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Activision Blizzard, Inc. (NASDAQ:ATVI) but similarly valued. We will take a look at Stellantis N.V. (NYSE:STLA), Ecolab Inc. (NYSE:ECL), Eaton Corporation plc (NYSE:ETN), Norfolk Southern Corp. (NYSE:NSC), Dominion Energy Inc. (NYSE:D), America Movil SAB de CV (NYSE:AMX), and NIO Inc. (NYSE:NIO). This group of stocks' market values are similar to ATVI's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position STLA,24,1178890,-4 ECL,39,2551887,-9 ETN,45,1089775,5 NSC,46,1049404,-12 D,27,545194,-7 AMX,11,167723,-2 NIO,30,1138194,-4 Average,31.7,1103010,-4.7 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 31.7 hedge funds with bullish positions and the average amount invested in these stocks was $1103 million. That figure was $4285 million in ATVI's case. Norfolk Southern Corp. (NYSE:NSC) is the most popular stock in this table. On the other hand America Movil SAB de CV (NYSE:AMX) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Activision Blizzard, Inc. (NASDAQ:ATVI) is more popular among hedge funds. Our overall hedge fund sentiment score for ATVI is 80.8. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.6% in 2021 through November 30th and still beat the market by 5.6 percentage points. Unfortunately ATVI wasn't nearly as popular as these 5 stocks and hedge funds that were betting on ATVI were disappointed as the stock returned -24.3% since the end of the third quarter (through 11/30) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.

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Disclosure: None. This article was originally published at Insider Monkey.