Avery Dennison Corp (AVY): Are Hedge Funds Right About This Stock?

Based on the fact that hedge funds have collectively under-performed the market for several years, it would be easy to assume that their stock picks simply aren’t very good. However, our research shows this not to be the case. In fact, when it comes to their very top picks collectively, they show a strong ability to pick winning stocks. Between November 1, 2014 and October 30 of this year, less than 49% of the stocks in the S&P 500 beat the market. However, hedge funds’ top 30 stock picks from the index had a much higher success rate than this, at 63%. The returns from these 30 stocks also easily bested the broader market, at 9.5% compared to 5.2%, despite there being a few duds in there like Micron and Anadarko (even their collective wisdom isn’t perfect). The results show that there is plenty of merit to imitating the collective wisdom of top investors.

Is Avery Dennison Corp (NYSE:AVY) the right pick for your portfolio? Hedge funds are in a bullish mood. The number of bullish hedge fund positions moved up by 2 recently. At the end of this article we will also compare AVY to other stocks including EnLink Midstream Partners LP (NYSE:ENLK), athenahealth, Inc (NASDAQ:ATHN), and Turquoise Hill Resources Ltd (NYSE:TRQ) to get a better sense of its popularity.

Now, let’s go over the latest action surrounding Avery Dennison Corp (NYSE:AVY).

What have hedge funds been doing with Avery Dennison Corp (NYSE:AVY)?

At the end of the third quarter, a total of 19 of the hedge funds tracked by Insider Monkey were long this stock, a change of 12% from one quarter earlier. With hedge funds’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Cliff Asness’s AQR Capital Management has the largest position in Avery Dennison Corp (NYSE:AVY), worth close to $99.9 million, accounting for 0.2% of its total 13F portfolio. The second largest stake is held by Adage Capital Management, led by Phill Gross and Robert Atchinson, holding a $67.3 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Some other professional money managers with similar optimism contain Israel Englander’s Millennium Management, Jim Simons’s Renaissance Technologies and Neil Chriss’s Hutchin Hill Capital.

With a general bullishness amongst the heavyweights, some big names were leading the bulls’ herd. Hutchin Hill Capital, managed by Neil Chriss, established the most outsized position in Avery Dennison Corp (NYSE:AVY). Hutchin Hill Capital had $4.6 million invested in the company at the end of the quarter. Ray Dalio’s Bridgewater Associates also initiated a $1.1 million position during the quarter. The other funds with brand new AVY positions are Andrew Feldstein and Stephen Siderow’s Blue Mountain Capital, John Overdeck and David Siegel’s Two Sigma Advisors, and Matthew Tewksbury’s Stevens Capital Management.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Avery Dennison Corp (NYSE:AVY) but similarly valued. We will take a look at EnLink Midstream Partners LP (NYSE:ENLK), athenahealth, Inc (NASDAQ:ATHN), Turquoise Hill Resources Ltd (NYSE:TRQ), and Huntington Ingalls Industries Inc (NYSE:HII). This group of stocks’ market caps resemble AVY’s market cap.

As you can see these stocks had an average of 19.25 hedge funds with bullish positions and the average amount invested in these stocks was $369 million. That figure was $206 million in AVY’s case. Huntington Ingalls Industries Inc (NYSE:HII) is the most popular stock in this table. On the other hand EnLink Midstream Partners LP (NYSE:ENLK) is the least popular one with only 6 bullish hedge fund positions. Avery Dennison Corp (NYSE:AVY) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard HII might be a better candidate to consider a long position.