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How Did Vistra Energy Corp. (VST) Perform In Comparison to Hedge Fund Favorites in 2019?

Debasis Saha

Hedge funds and other investment firms that we track manage billions of dollars of their wealthy clients' money, and needless to say, they are painstakingly thorough when analyzing where to invest this money, as their own wealth also depends on it. Regardless of the various methods used by elite investors like David Tepper and David Abrams, the resources they expend are second-to-none. This is especially valuable when it comes to small-cap stocks, which is where they generate their strongest outperformance, as their resources give them a huge edge when it comes to studying these stocks compared to the average investor, which is why we intently follow their activity in the small-cap space. Nevertheless, it is also possible to identify cheap large cap stocks by following the footsteps of best performing hedge funds. In this article we are going to take a look at smart money sentiment towards Vistra Energy Corp. (NYSE:VST).

Vistra Energy Corp. (NYSE:VST) has experienced an increase in hedge fund interest recently. Our calculations also showed that VST isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).

Today there are many tools shareholders have at their disposal to value stocks. A duo of the less utilized tools are hedge fund and insider trading activity. Our experts have shown that, historically, those who follow the best picks of the top fund managers can beat their index-focused peers by a solid margin (see the details here).

[caption id="attachment_30614" align="alignnone" width="600"] Howard Marks of Oaktree Capital Management[/caption]

Howard Marks OAKTREE CAPITAL MANAGEMENT

We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius' weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock already gained 20 percent. Keeping this in mind let's take a peek at the latest hedge fund action encompassing Vistra Energy Corp. (NYSE:VST).

What have hedge funds been doing with Vistra Energy Corp. (NYSE:VST)?

At Q3's end, a total of 42 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 8% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in VST over the last 17 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is VST A Good Stock To Buy?

The largest stake in Vistra Energy Corp. (NYSE:VST) was held by Oaktree Capital Management, which reported holding $729.1 million worth of stock at the end of September. It was followed by Highland Capital Management with a $211.3 million position. Other investors bullish on the company included Scopia Capital, Adage Capital Management, and Avenue Capital. In terms of the portfolio weights assigned to each position Avenue Capital allocated the biggest weight to Vistra Energy Corp. (NYSE:VST), around 56.19% of its 13F portfolio. Farmstead Capital Management is also relatively very bullish on the stock, setting aside 42.51 percent of its 13F equity portfolio to VST.

As one would reasonably expect, some big names were leading the bulls' herd. Winton Capital Management, managed by David Harding, assembled the largest position in Vistra Energy Corp. (NYSE:VST). Winton Capital Management had $8.8 million invested in the company at the end of the quarter. Joel Greenblatt's Gotham Asset Management also made a $5.1 million investment in the stock during the quarter. The other funds with brand new VST positions are Peter J. Hark's Shelter Harbor Advisors, Guy Shahar's DSAM Partners, and Matthew Hulsizer's PEAK6 Capital Management.

Let's now review hedge fund activity in other stocks similar to Vistra Energy Corp. (NYSE:VST). We will take a look at Fortinet Inc (NASDAQ:FTNT), Genmab A/S (NASDAQ:GMAB), International Flavors & Fragrances Inc (NYSE:IFF), and SS&C Technologies Holdings, Inc. (NASDAQ:SSNC). All of these stocks' market caps match VST's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FTNT,38,1187931,4 GMAB,10,136229,10 IFF,19,202887,1 SSNC,45,1483434,4 Average,28,752620,4.75 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 28 hedge funds with bullish positions and the average amount invested in these stocks was $753 million. That figure was $2382 million in VST's case. SS&C Technologies Holdings, Inc. (NASDAQ:SSNC) is the most popular stock in this table. On the other hand Genmab A/S (NASDAQ:GMAB) is the least popular one with only 10 bullish hedge fund positions. Vistra Energy Corp. (NYSE:VST) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but 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 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Unfortunately VST wasn't nearly as popular as these 20 stocks and hedge funds that were betting on VST were disappointed as the stock returned 5.4% in 2019 (through December 23rd) 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 many of these stocks already outperformed the market so far this year. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

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

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