Looking for high-potential stocks? Just follow the big players within the hedge fund industry! This is not an ad, but let’s take a brief look at what statistics has to say about hedge funds’ stock picking abilities. The Standard and Poor’s 500 Index returned approximately 5.2% in the 12 months ending October 30, with more than 51% of the stocks in the index failing to beat the benchmark. Therefore, the odds that one will pin down a ‘winner’ by randomly picking a stock are less than the odds in a fair coin-tossing game. Conversely, hedge funds’ 30 preferred S&P 500 stocks (as of September 2014) generated a return of 9.5% during the same 12-month period, while 63% of these stock picks outperformed the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering a 16-year period indicates that hedge funds’ stock picks generate superior risk-adjusted returns. That’s why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like AVX Corporation (NYSE:AVX).
AVX Corporation (NYSE:AVX) was in 11 hedge funds’ portfolios at the end of the third quarter of 2015. AVX Corporation (NYSE:AVX) has experienced a decrease in activity from the world’s largest hedge funds recently. There were 13 hedge funds in our database with AVX Corporation (NYSE:AVX) positions at the end of the previous quarter. At the end of this article, we will also compare AVX Corporation (NYSE:AVX) to other stocks including Chico’s FAS, Inc. (NYSE:CHS), SM Energy Co. (NYSE:SM), and Asbury Automotive Group, Inc. (NYSE:ABG) to get a better sense of its popularity.
With all of this in mind, let’s take a peek at the recent action surrounding AVX Corporation (NYSE:AVX).
What have hedge funds been doing with AVX Corporation (NYSE:AVX)?
Heading into Q4, a total of 11 of the hedge funds tracked by Insider Monkey were long in this stock, a decline of 15% from the previous quarter. With the smart money’s capital changing hands, there exists an “upper tier” of key hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
When looking at the hedgies followed by Insider Monkey, Royce & Associates, mutual fund managed by Chuck Royce, holds the number one position in AVX Corporation (NYSE:AVX). Royce & Associates has a $182.1 million position in the stock, comprising 1% of its 13F portfolio. On Royce & Associates’s heels is Gotham Asset Management, led by Joel Greenblatt, holding a $6.7 million position; 0.1% of its 13F portfolio is allocated to the stock. Other hedge funds with similar optimism encompass Ken Griffin’s Citadel Investment Group, David Dreman’s Dreman Value Management and John Overdeck and David Siegel’s Two Sigma Advisors.
Since AVX Corporation (NYSE:AVX) has experienced declining sentiment from the smart money, it’s safe to say that there is a sect of hedge funds that slashed their positions entirely heading into Q4. Interestingly, Israel Englander’s Millennium Management cut the biggest investment of the “upper crust” of funds watched by Insider Monkey, comprising close to $0.5 million in stock. Neil Chriss’ fund, Hutchin Hill Capital, also dumped its stock, about $0.4 million worth. These moves are important to note, as aggregate hedge fund interest dropped by 2 funds heading into Q4.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as AVX Corporation (NYSE:AVX) but similarly valued. We will take a look at Chico’s FAS, Inc. (NYSE:CHS), SM Energy Co. (NYSE:SM), Asbury Automotive Group, Inc. (NYSE:ABG), and Teekay Corporation (NYSE:TK). This group of stocks’ market values are closest to AVX Corporation (NYSE:AVX)’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 23 hedge funds with bullish positions and the average amount invested in these stocks was $432 million.That figure was $198 millions in AVX Corporation (NYSE:AVX)’s case. Asbury Automotive Group, Inc. (NYSE:ABG) is the most popular stock in this table. On the other hand, Teekay Corporation (NYSE:TK) is the least popular one with only 19 bullish hedge fund positions. Compared to these stocks AVX Corporation (NYSE:AVX) is even less popular than Teekay Corporation (NYSE:TK). Considering that hedge funds aren’t fond of this stock, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.