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Hedge Fund Consensus Stocks vs. Activision Blizzard, Inc. (ATVI) In 2019

Abigail Fisher

Investing in hedge funds can bring large profits, but it’s not for everybody, since hedge funds are available only for high-net-worth individuals. They generate significant returns for investors to justify their large fees and they allocate a lot of time and employ complex research processes to determine the best stocks to invest in. A particularly interesting group of stocks that hedge funds like is the small-caps. The huge amount of capital does not allow hedge funds to invest a lot in small-caps, but our research showed that their most popular small-cap ideas are less efficiently priced and generate stronger returns than their large- and mega-cap picks and the broader market. That is why we pay special attention to the hedge fund activity in the small-cap space. Nevertheless, it is also possible to find underpriced large-cap stocks by following the hedge funds' moves. In this article, we look at what those funds think of Activision Blizzard, Inc. (NASDAQ:ATVI) based on that data.

Activision Blizzard, Inc. (NASDAQ:ATVI) was in 70 hedge funds' portfolios at the end of the third quarter of 2019. ATVI has seen an increase in enthusiasm from smart money in recent months. There were 46 hedge funds in our database with ATVI positions at the end of the previous quarter. Our calculations also showed that ATVI 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).

In today’s marketplace there are many indicators market participants have at their disposal to analyze stocks. A duo of the most under-the-radar indicators are hedge fund and insider trading signals. Our researchers have shown that, historically, those who follow the top picks of the elite hedge fund managers can outclass their index-focused peers by a very impressive amount (see the details here).

[caption id="attachment_783421" align="aligncenter" width="473"] Ryan Frick of Dorsal Capital[/caption]

Ryan Frick Dorsal Capital

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 view the recent hedge fund action surrounding Activision Blizzard, Inc. (NASDAQ:ATVI).

What have hedge funds been doing with Activision Blizzard, Inc. (NASDAQ:ATVI)?

At Q3's end, a total of 70 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 52% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in ATVI over the last 17 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Activision Blizzard, Inc. (NASDAQ:ATVI) was held by Lone Pine Capital, which reported holding $595.1 million worth of stock at the end of September. It was followed by Coatue Management with a $320.6 million position. Other investors bullish on the company included Alyeska Investment Group, Citadel Investment Group, and Suvretta Capital Management. In terms of the portfolio weights assigned to each position SoMa Equity Partners allocated the biggest weight to Activision Blizzard, Inc. (NASDAQ:ATVI), around 10.66% of its 13F portfolio. AlphaOne Capital Partners is also relatively very bullish on the stock, dishing out 7.76 percent of its 13F equity portfolio to ATVI.

As aggregate interest increased, key hedge funds have jumped into Activision Blizzard, Inc. (NASDAQ:ATVI) headfirst. Suvretta Capital Management, managed by Aaron Cowen, assembled the most valuable position in Activision Blizzard, Inc. (NASDAQ:ATVI). Suvretta Capital Management had $161.2 million invested in the company at the end of the quarter. Ryan Frick and Oliver Evans's Dorsal Capital Management also initiated a $87.3 million position during the quarter. The other funds with brand new ATVI positions are Brandon Haley's Holocene Advisors, Alexander Mitchell's Scopus Asset Management, and David Fiszel's Honeycomb Asset Management.

Let's also examine 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 Sempra Energy (NYSE:SRE), Marathon Petroleum Corp (NYSE:MPC), Occidental Petroleum Corporation (NYSE:OXY), and Ross Stores, Inc. (NASDAQ:ROST). 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 SRE,28,1270412,3 MPC,63,2858868,3 OXY,57,2774136,15 ROST,39,1067484,7 Average,46.75,1992725,7 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 46.75 hedge funds with bullish positions and the average amount invested in these stocks was $1993 million. That figure was $3015 million in ATVI's case. Marathon Petroleum Corp (NYSE:MPC) is the most popular stock in this table. On the other hand Sempra Energy (NYSE:SRE) is the least popular one with only 28 bullish hedge fund positions. Compared to these stocks Activision Blizzard, Inc. (NASDAQ:ATVI) is more popular among hedge funds. 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 ATVI wasn't nearly as popular as these 20 stocks and hedge funds that were betting on ATVI were disappointed as the stock returned 27.5% so far in 2019 (through 12/23) 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 65 percent of these stocks already outperformed the market in 2019 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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