How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Vistra Corp. (NYSE:VST).
Vistra Corp. (NYSE:VST) has experienced an increase in hedge fund interest recently. Vistra Corp. (NYSE:VST) was in 38 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 49. Our calculations also showed that VST isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Keeping this in mind we’re going to review the latest hedge fund action surrounding Vistra Corp. (NYSE:VST).
Marc Lasry of Avenue Capital
Do Hedge Funds Think VST Is A Good Stock To Buy Now?
At the end of September, a total of 38 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 19% from the second quarter of 2021. Below, you can check out the change in hedge fund sentiment towards VST over the last 25 quarters. With hedge funds’ sentiment swirling, there exists a select group of key hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Howard Marks’s Oaktree Capital Management has the biggest position in Vistra Corp. (NYSE:VST), worth close to $512 million, amounting to 7.4% of its total 13F portfolio. The second largest stake is held by Citadel Investment Group, managed by Ken Griffin, which holds a $156.6 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Remaining members of the smart money that hold long positions comprise Marc Lasry’s Avenue Capital, John M. Angelo and Michael L. Gordon’s Angelo Gordon & Co and Matthew Barrett’s Glendon Capital Management. In terms of the portfolio weights assigned to each position Avenue Capital allocated the biggest weight to Vistra Corp. (NYSE:VST), around 68.06% of its 13F portfolio. Oaktree Capital Management is also relatively very bullish on the stock, setting aside 7.43 percent of its 13F equity portfolio to VST.
As aggregate interest increased, specific money managers have been driving this bullishness. Luminus Management, managed by Jonathan Barrett and Paul Segal, assembled the most outsized position in Vistra Corp. (NYSE:VST). Luminus Management had $16.2 million invested in the company at the end of the quarter. Louis Bacon’s Moore Global Investments also made a $11.5 million investment in the stock during the quarter. The following funds were also among the new VST investors: Alex Duran and Scott Hendrickson’s Permian Investment Partners, Sander Gerber’s Hudson Bay Capital Management, and Michael Gelband’s ExodusPoint Capital.
Let’s now take a look at hedge fund activity in other stocks similar to Vistra Corp. (NYSE:VST). We will take a look at Berry Global Group Inc (NYSE:BERY), Aspen Technology, Inc. (NASDAQ:AZPN), Zynga Inc (NASDAQ:ZNGA), The Western Union Company (NYSE:WU), Sealed Air Corporation (NYSE:SEE), Under Armour Inc (NYSE:UA), and Rexford Industrial Realty Inc (NYSE:REXR). This group of stocks’ market values are closest to VST’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BERY | 39 | 1245908 | 2 |
| AZPN | 20 | 620030 | -3 |
| ZNGA | 52 | 603900 | 3 |
| WU | 27 | 234768 | -4 |
| SEE | 33 | 626876 | 5 |
| UA | 48 | 1643556 | -3 |
| REXR | 29 | 358442 | 8 |
| Average | 35.4 | 761926 | 1.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 35.4 hedge funds with bullish positions and the average amount invested in these stocks was $762 million. That figure was $1221 million in VST’s case. Zynga Inc (NASDAQ:ZNGA) is the most popular stock in this table. On the other hand Aspen Technology, Inc. (NASDAQ:AZPN) is the least popular one with only 20 bullish hedge fund positions. Vistra Corp. (NYSE:VST) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for VST is 61.4. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.6% in 2021 through November 30th and still beat the market by 5.6 percentage points. Hedge funds were also right about betting on VST as the stock returned 16.3% since the end of Q3 (through 11/30) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Follow Vistra Corp. (NYSE:VST)
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Disclosure: None. This article was originally published at Insider Monkey.
