Hedge Funds Are Betting On AvalonBay Communities Inc (AVB)

Does AvalonBay Communities Inc (NYSE:AVB) represent a good buying opportunity at the moment? Let’s briefly check the hedge fund interest towards the company. Hedge fund firms constantly search out bright intellectuals and highly-experienced employees and throw away millions of dollars on research activities, so it is no wonder why they tend to generate millions in profits each year. It is also true that some hedge fund players fail unconceivably on some occasions, but their stock picks have been generating superior risk-adjusted returns on average over the years.

Is AvalonBay Communities Inc (NYSE:AVB) a buy, sell, or hold? Hedge funds are in a bullish mood. The number of long hedge fund bets went up by 1 in recent months. Our calculations also showed that avb isn’t among the 30 most popular stocks among hedge funds.

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 18 percentage points since May 2014 through December 3, 2018 (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 24% through December 3, 2018. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.


Let’s view the latest hedge fund action encompassing AvalonBay Communities Inc (NYSE:AVB).

How have hedgies been trading AvalonBay Communities Inc (NYSE:AVB)?

At the end of the third quarter, a total of 26 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 4% from the second quarter of 2018. By comparison, 24 hedge funds held shares or bullish call options in AVB heading into this year. With the smart money’s capital changing hands, there exists a few noteworthy hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).

No of Hedge Funds with AVB Positions

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Jim Simons’s Renaissance Technologies has the biggest position in AvalonBay Communities Inc (NYSE:AVB), worth close to $280.7 million, corresponding to 0.3% of its total 13F portfolio. Coming in second is AEW Capital Management, managed by Jeffrey Furber, which holds a $217.3 million position; the fund has 6.1% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors that hold long positions include Israel Englander’s Millennium Management, Ken Griffin’s Citadel Investment Group and Dmitry Balyasny’s Balyasny Asset Management.

With a general bullishness amongst the heavyweights, some big names were leading the bulls’ herd. Two Sigma Advisors, managed by John Overdeck and David Siegel, established the largest position in AvalonBay Communities Inc (NYSE:AVB). Two Sigma Advisors had $8.8 million invested in the company at the end of the quarter. Jeffrey Talpins’s Element Capital Management also initiated a $1.6 million position during the quarter. The only other fund with a new position in the stock is George Zweig, Shane Haas and Ravi Chander’s Signition LP.

Let’s go over hedge fund activity in other stocks similar to AvalonBay Communities Inc (NYSE:AVB). We will take a look at Weyerhaeuser Co. (NYSE:WY), Equity Residential (NYSE:EQR), Brown-Forman Corporation (NYSE:BF), and Parker-Hannifin Corporation (NYSE:PH). All of these stocks’ market caps are similar to AVB’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
WY 35 648691 7
EQR 23 432981 -1
BF 22 725377 3
PH 27 824113 1
Average 26.75 657791 2.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 26.75 hedge funds with bullish positions and the average amount invested in these stocks was $658 million. That figure was $971 million in AVB’s case. Weyerhaeuser Co. (NYSE:WY) is the most popular stock in this table. On the other hand Brown-Forman Corporation (NYSE:BF) is the least popular one with only 22 bullish hedge fund positions. AvalonBay Communities Inc (NYSE:AVB) 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 WY might be a better candidate to consider a long position.

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