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Do Hedge Funds Love Avantor, Inc. (AVTR)?

The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on March 31st, about a week after the S&P 500 Index bottomed. We at Insider Monkey have made an extensive database of more than 821 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded Avantor, Inc. (NYSE:AVTR) based on those filings.

Is Avantor, Inc. (NYSE:AVTR) going to take off soon? Prominent investors are buying. The number of long hedge fund positions increased by 1 recently. Our calculations also showed that AVTR isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). AVTR was in 29 hedge funds’ portfolios at the end of the first quarter of 2020. There were 28 hedge funds in our database with AVTR positions at the end of the previous quarter.

Video: Watch our video about the top 5 most popular hedge fund stocks.

In the eyes of most shareholders, hedge funds are assumed to be unimportant, outdated financial vehicles of the past. While there are over 8000 funds trading today, We hone in on the aristocrats of this group, around 850 funds. These money managers shepherd the lion’s share of the smart money’s total asset base, and by following their first-class stock picks, Insider Monkey has brought to light numerous investment strategies that have historically surpassed the broader indices. Insider Monkey’s flagship short hedge fund strategy outstripped the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Third Point 2014 Q3 Investor Letter

Dan Loeb of Third Point

We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like these. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to take a peek at the new hedge fund action encompassing Avantor, Inc. (NYSE:AVTR).

Hedge fund activity in Avantor, Inc. (NYSE:AVTR)

Heading into the second quarter of 2020, a total of 29 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 4% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards AVTR over the last 18 quarters. With hedgies’ capital changing hands, there exists a few notable hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).

The largest stake in Avantor, Inc. (NYSE:AVTR) was held by Viking Global, which reported holding $125.5 million worth of stock at the end of September. It was followed by Eminence Capital with a $73.9 million position. Other investors bullish on the company included Maverick Capital, Third Point, and Millennium Management. In terms of the portfolio weights assigned to each position Highside Global Management allocated the biggest weight to Avantor, Inc. (NYSE:AVTR), around 5.68% of its 13F portfolio. Highline Capital Management is also relatively very bullish on the stock, setting aside 4.84 percent of its 13F equity portfolio to AVTR.

As industrywide interest jumped, key money managers were breaking ground themselves. Highline Capital Management, managed by Jacob Doft, assembled the most valuable position in Avantor, Inc. (NYSE:AVTR). Highline Capital Management had $19.9 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also initiated a $11 million position during the quarter. The other funds with new positions in the stock are Zach Petrone’s Highside Global Management, Phill Gross and Robert Atchinson’s Adage Capital Management, and Doug Silverman and Alexander Klabin’s Senator Investment Group.

Let’s now take a look at hedge fund activity in other stocks similar to Avantor, Inc. (NYSE:AVTR). We will take a look at Ceridian HCM Holding Inc. (NYSE:CDAY), Tenaris S.A. (NYSE:TS), Cloudflare, Inc. (NYSE:NET), and CyrusOne Inc (NASDAQ:CONE). This group of stocks’ market caps are similar to AVTR’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CDAY 24 1189081 -7
TS 15 212792 -1
NET 24 498974 2
CONE 31 317450 -1
Average 23.5 554574 -1.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 23.5 hedge funds with bullish positions and the average amount invested in these stocks was $555 million. That figure was $521 million in AVTR’s case. CyrusOne Inc (NASDAQ:CONE) is the most popular stock in this table. On the other hand Tenaris S.A. (NYSE:TS) is the least popular one with only 15 bullish hedge fund positions. Avantor, Inc. (NYSE:AVTR) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May but still beat the market by 13.2 percentage points. Hedge funds were also right about betting on AVTR as the stock returned 51.9% in Q2 (through the end of May) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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Disclosure: None. This article was originally published at Insider Monkey.