World-class money managers like Ken Griffin and Barry Rosenstein only invest their wealthy clients' money after undertaking a rigorous examination of any potential stock. They are particularly successful in this regard when it comes to small-cap stocks, which their peerless research gives them a big information advantage on when it comes to judging their worth. It's not surprising then that they generate their biggest returns from these stocks and invest more of their money in these stocks on average than other investors. It's also not surprising then that we pay close attention to these picks ourselves and have built a market-beating investment strategy around them.
Is Avnet, Inc. (NYSE:AVT) undervalued? Hedge funds are becoming hopeful. The number of long hedge fund positions rose by 10 recently. Our calculations also showed that AVT isn't among the 30 most popular stocks among hedge funds (view the video below). AVT was in 27 hedge funds' portfolios at the end of the second quarter of 2019. There were 17 hedge funds in our database with AVT holdings at the end of the previous quarter. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
To most shareholders, hedge funds are perceived as slow, old investment vehicles of the past. While there are greater than 8000 funds in operation at the moment, We hone in on the top tier of this group, approximately 750 funds. It is estimated that this group of investors handle the lion's share of all hedge funds' total capital, and by shadowing their matchless equity investments, Insider Monkey has come up with various investment strategies that have historically beaten Mr. Market. Insider Monkey's flagship hedge fund strategy beat the S&P 500 index by around 5 percentage points per year since its inception in May 2014. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 25.7% since February 2017 (through September 30th) even though the market was up more than 33% during the same period. We just shared a list of 10 short targets in our latest quarterly update .
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let's view the latest hedge fund action encompassing Avnet, Inc. (NYSE:AVT).
How are hedge funds trading Avnet, Inc. (NYSE:AVT)?
At Q2's end, a total of 27 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 59% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards AVT over the last 16 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Avnet, Inc. (NYSE:AVT) was held by Pzena Investment Management, which reported holding $332.3 million worth of stock at the end of March. It was followed by AQR Capital Management with a $95.9 million position. Other investors bullish on the company included Diamond Hill Capital, Polaris Capital Management, and Atlantic Investment Management.
Consequently, some big names have been driving this bullishness. Renaissance Technologies established the largest position in Avnet, Inc. (NYSE:AVT). Renaissance Technologies had $1.6 million invested in the company at the end of the quarter. Michael Kharitonov and Jon David McAuliffe's Voleon Capital also made a $1.4 million investment in the stock during the quarter. The other funds with brand new AVT positions are Minhua Zhang's Weld Capital Management, Mark Broach's Manatuck Hill Partners, and Mike Vranos's Ellington.
Let's also examine hedge fund activity in other stocks similar to Avnet, Inc. (NYSE:AVT). These stocks are First Industrial Realty Trust, Inc. (NYSE:FR), The Macerich Company (NYSE:MAC), Nuance Communications Inc. (NASDAQ:NUAN), and Prosperity Bancshares, Inc. (NYSE:PB). All of these stocks' market caps are similar to AVT's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FR,18,290383,7 MAC,21,288149,-1 NUAN,28,529243,0 PB,16,107741,7 Average,20.75,303879,3.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.75 hedge funds with bullish positions and the average amount invested in these stocks was $304 million. That figure was $609 million in AVT's case. Nuance Communications Inc. (NASDAQ:NUAN) is the most popular stock in this table. On the other hand Prosperity Bancshares, Inc. (NYSE:PB) is the least popular one with only 16 bullish hedge fund positions. Avnet, Inc. (NYSE:AVT) 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately AVT wasn't nearly as popular as these 20 stocks and hedge funds that were betting on AVT were disappointed as the stock returned -1.3% during the third quarter 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.
Disclosure: None. This article was originally published at Insider Monkey.