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The 800+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the second quarter, which unveil their equity positions as of June 30th. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards Avaya Holdings Corp. (NYSE:AVYA).
Avaya Holdings Corp. (NYSE:AVYA) shares haven't seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 37 hedge funds' portfolios at the end of June. Our calculations also showed that AVYA isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings). The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as Harmony Gold Mining Company Limited (NYSE:HMY), Hub Group Inc (NASDAQ:HUBG), and Prothena Corporation plc (NASDAQ:PRTA) to gather more data points.
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 S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.
Richard Driehaus of Driehaus Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, we like undervalued, EBITDA-positive growth stocks, so we are checking out stock pitches like this emerging biotech stock. 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With all of this in mind let's take a look at the recent hedge fund action regarding Avaya Holdings Corp. (NYSE:AVYA).
Do Hedge Funds Think AVYA Is A Good Stock To Buy Now?
At the end of June, a total of 37 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards AVYA over the last 24 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Alkeon Capital Management, managed by Panayotis Takis Sparaggis, holds the largest position in Avaya Holdings Corp. (NYSE:AVYA). Alkeon Capital Management has a $104.5 million position in the stock, comprising 0.2% of its 13F portfolio. On Alkeon Capital Management's heels is Michel Massoud of Melqart Asset Management, with a $74.3 million position; 3.3% of its 13F portfolio is allocated to the stock. Other peers that hold long positions comprise Mark Coe's Intrinsic Edge Capital, Richard Driehaus's Driehaus Capital and Jeremy Carton and Gilbert Li's Alta Fundamental Advisers. In terms of the portfolio weights assigned to each position Alta Fundamental Advisers allocated the biggest weight to Avaya Holdings Corp. (NYSE:AVYA), around 15.97% of its 13F portfolio. Provenire Capital is also relatively very bullish on the stock, dishing out 5.17 percent of its 13F equity portfolio to AVYA.
Due to the fact that Avaya Holdings Corp. (NYSE:AVYA) has experienced declining sentiment from hedge fund managers, it's safe to say that there was a specific group of money managers that elected to cut their entire stakes last quarter. Intriguingly, Xiuping Li's Opti Capital Management said goodbye to the largest investment of all the hedgies tracked by Insider Monkey, worth an estimated $45.4 million in stock, and Ed Bosek's BeaconLight Capital was right behind this move, as the fund dropped about $4 million worth. These bearish behaviors are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's now review hedge fund activity in other stocks similar to Avaya Holdings Corp. (NYSE:AVYA). We will take a look at Harmony Gold Mining Company Limited (NYSE:HMY), Hub Group Inc (NASDAQ:HUBG), Prothena Corporation plc (NASDAQ:PRTA), Telos Corporation (NASDAQ:TLS), First Midwest Bancorp Inc (NASDAQ:FMBI), First Merchants Corporation (NASDAQ:FRME), and Belden Inc. (NYSE:BDC). This group of stocks' market valuations match AVYA's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HMY,11,102386,3 HUBG,24,205728,5 PRTA,20,888175,3 TLS,19,228954,4 FMBI,17,107837,4 FRME,12,118179,1 BDC,15,172473,-2 Average,16.9,260533,2.6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.9 hedge funds with bullish positions and the average amount invested in these stocks was $261 million. That figure was $436 million in AVYA's case. Hub Group Inc (NASDAQ:HUBG) is the most popular stock in this table. On the other hand Harmony Gold Mining Company Limited (NYSE:HMY) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Avaya Holdings Corp. (NYSE:AVYA) is more popular among hedge funds. Our overall hedge fund sentiment score for AVYA is 81.4. 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 21.8% in 2021 through October 11th and still beat the market by 4.4 percentage points. Unfortunately AVYA wasn't nearly as popular as these 5 stocks and hedge funds that were betting on AVYA were disappointed as the stock returned -28% since the end of the second quarter (through 10/11) 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.