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 smartest analysts and expensive data/information sources that individual investors can't match. So should one consider investing in Avanos Medical (NYSE:AVNS)? The smart money sentiment can provide an answer to this question.
Is Avanos Medical, Inc. (NYSE:AVNS) a good stock to buy now? Hedge funds are taking a bearish view. The number of long hedge fund bets retreated by 3 lately. Our calculations also showed that avns isn't among the 30 most popular stocks among hedge funds.
If you'd ask most traders, hedge funds are assumed to be unimportant, old investment tools of years past. While there are over 8000 funds in operation today, Our experts choose to focus on the aristocrats of this group, approximately 750 funds. These money managers administer most of the hedge fund industry's total asset base, and by keeping track of their inimitable investments, Insider Monkey has formulated a number of investment strategies that have historically outrun the broader indices. Insider Monkey's flagship hedge fund strategy outstripped the S&P 500 index by around 5 percentage points a year since its inception in May 2014 through June 18th. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 28.2% since February 2017 (through June 18th) even though the market was up nearly 30% during the same period. We just shared a list of 5 short targets in our latest quarterly update and they are already down an average of 8.2% in a month whereas our long picks outperformed the market by 2.5 percentage points in this volatile 5 week period (our long picks also beat the market by 15 percentage points so far this year).
We're going to review the new hedge fund action regarding Avanos Medical, Inc. (NYSE:AVNS).
What does smart money think about Avanos Medical, Inc. (NYSE:AVNS)?
At Q1's end, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -21% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards AVNS over the last 15 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, D E Shaw was the largest shareholder of Avanos Medical, Inc. (NYSE:AVNS), with a stake worth $16.5 million reported as of the end of March. Trailing D E Shaw was Millennium Management, which amassed a stake valued at $10.4 million. Millennium Management, Pura Vida Investments, and Two Sigma Advisors were also very fond of the stock, giving the stock large weights in their portfolios.
Because Avanos Medical, Inc. (NYSE:AVNS) has experienced declining sentiment from hedge fund managers, it's safe to say that there exists a select few hedgies that slashed their positions entirely heading into Q3. Interestingly, Steve Cohen's Point72 Asset Management dropped the largest investment of all the hedgies followed by Insider Monkey, valued at about $3.3 million in call options. Matthew Hulsizer's fund, PEAK6 Capital Management, also dropped its call options, about $1 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest was cut by 3 funds heading into Q3.
Let's now review hedge fund activity in other stocks similar to Avanos Medical, Inc. (NYSE:AVNS). These stocks are BEST Inc. (NYSE:BEST), Four Corners Property Trust, Inc. (NYSE:FCPT), Power Integrations Inc (NASDAQ:POWI), and Invesco Mortgage Capital Inc (NYSE:IVR). This group of stocks' market valuations match AVNS's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BEST,16,62721,7 FCPT,13,92837,0 POWI,6,79088,2 IVR,15,94994,2 Average,12.5,82410,2.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.5 hedge funds with bullish positions and the average amount invested in these stocks was $82 million. That figure was $41 million in AVNS's case. BEST Inc. (NYSE:BEST) is the most popular stock in this table. On the other hand Power Integrations Inc (NASDAQ:POWI) is the least popular one with only 6 bullish hedge fund positions. Avanos Medical, Inc. (NYSE:AVNS) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. A small number of hedge funds were also right about betting on AVNS, though not to the same extent, as the stock returned 4.7% during the same time frame and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
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