We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn't mean that they don't have occasional colossal losses; they do (like Peltz's recent General Electric losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards AVX Corporation (NYSE:AVX).
Is AVX Corporation (NYSE:AVX) a healthy stock for your portfolio? Money managers are taking a bearish view. The number of bullish hedge fund positions went down by 5 recently. Our calculations also showed that avx isn't among the 30 most popular stocks among hedge funds. AVX was in 11 hedge funds' portfolios at the end of the first quarter of 2019. There were 16 hedge funds in our database with AVX positions at the end of the previous quarter.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 30.9% through May 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let's go over the fresh hedge fund action encompassing AVX Corporation (NYSE:AVX).
How have hedgies been trading AVX Corporation (NYSE:AVX)?
At the end of the first quarter, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -31% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in AVX over the last 15 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.
Among these funds, Royce & Associates held the most valuable stake in AVX Corporation (NYSE:AVX), which was worth $81.8 million at the end of the first quarter. On the second spot was Sensato Capital Management which amassed $8.9 million worth of shares. Moreover, GLG Partners, Citadel Investment Group, and Renaissance Technologies were also bullish on AVX Corporation (NYSE:AVX), allocating a large percentage of their portfolios to this stock.
Seeing as AVX Corporation (NYSE:AVX) has witnessed a decline in interest from hedge fund managers, logic holds that there were a few funds that decided to sell off their full holdings heading into Q3. It's worth mentioning that Israel Englander's Millennium Management sold off the largest stake of the 700 funds watched by Insider Monkey, worth close to $0.8 million in stock, and Ray Dalio's Bridgewater Associates was right behind this move, as the fund dropped about $0.5 million worth. These transactions are interesting, as total hedge fund interest dropped by 5 funds heading into Q3.
Let's now review hedge fund activity in other stocks similar to AVX Corporation (NYSE:AVX). These stocks are Conduent Incorporated (NYSE:CNDT), Clearway Energy, Inc. (NYSE:CWEN), Sanderson Farms, Inc. (NASDAQ:SAFM), and Owens-Illinois Inc (NYSE:OI). This group of stocks' market valuations are similar to AVX's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CNDT,30,579659,-5 CWEN,27,155158,15 SAFM,21,485986,8 OI,23,341080,2 Average,25.25,390471,5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 25.25 hedge funds with bullish positions and the average amount invested in these stocks was $390 million. That figure was $108 million in AVX's case. Conduent Incorporated (NYSE:CNDT) is the most popular stock in this table. On the other hand Sanderson Farms, Inc. (NASDAQ:SAFM) is the least popular one with only 21 bullish hedge fund positions. Compared to these stocks AVX Corporation (NYSE:AVX) is even less popular than SAFM. Hedge funds dodged a bullet by taking a bearish stance towards AVX. Our calculations showed that the top 20 most popular hedge fund stocks returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately AVX wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); AVX investors were disappointed as the stock returned -4.4% during the same time frame 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 13 of these stocks already outperformed the market so far in the second quarter.
Disclosure: None. This article was originally published at Insider Monkey.