Hedge Funds Are Nibbling On Avnet, Inc. (AVT)

In this article we will check out the progression of hedge fund sentiment towards Avnet, Inc. (NYSE:AVT) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.

Is Avnet, Inc. (NYSE:AVT) a healthy stock for your portfolio? The smart money was in an optimistic mood. The number of bullish hedge fund bets inched up by 2 recently. Avnet, Inc. (NYSE:AVT) was in 27 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 33. Our calculations also showed that AVT isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 25 hedge funds in our database with AVT positions at the end of the fourth quarter.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.

Chuck Royce

Chuck Royce of Royce & Associates

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, economists warn of inflation flare up. So, we are checking out this backdoor gold play that has hit peak gains of 718% in a little over a year. We go through lists like the 10 best battery 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Now let’s analyze the recent hedge fund action encompassing Avnet, Inc. (NYSE:AVT).

Do Hedge Funds Think AVT Is A Good Stock To Buy Now?

At first quarter’s end, a total of 27 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 8% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards AVT over the last 23 quarters. With the smart money’s capital changing hands, there exists a few key hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).

Is AVT A Good Stock To Buy?

Of the funds tracked by Insider Monkey, Pzena Investment Management, managed by Richard S. Pzena, holds the largest position in Avnet, Inc. (NYSE:AVT). Pzena Investment Management has a $512.5 million position in the stock, comprising 2.1% of its 13F portfolio. On Pzena Investment Management’s heels is Royce & Associates, managed by Chuck Royce, which holds a $54.1 million position; 0.4% of its 13F portfolio is allocated to the stock. Some other peers with similar optimism encompass Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Alexander Roepers’s Atlantic Investment Management and Bernard Horn’s Polaris Capital Management. In terms of the portfolio weights assigned to each position Atlantic Investment Management allocated the biggest weight to Avnet, Inc. (NYSE:AVT), around 11.33% of its 13F portfolio. SG Capital Management is also relatively very bullish on the stock, dishing out 4.43 percent of its 13F equity portfolio to AVT.

With a general bullishness amongst the heavyweights, specific money managers have jumped into Avnet, Inc. (NYSE:AVT) headfirst. Magnetar Capital, managed by Alec Litowitz and Ross Laser, assembled the most outsized position in Avnet, Inc. (NYSE:AVT). Magnetar Capital had $1.1 million invested in the company at the end of the quarter. Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors also made a $1 million investment in the stock during the quarter. The other funds with brand new AVT positions are Peter Muller’s PDT Partners, Dmitry Balyasny’s Balyasny Asset Management, and Karim Abbadi and Edward McBride’s Centiva Capital.

Let’s now take a look at hedge fund activity in other stocks similar to Avnet, Inc. (NYSE:AVT). These stocks are Hutchison China MediTech Limited (NASDAQ:HCM), Qualys Inc (NASDAQ:QLYS), Alignment Healthcare, Inc. (NASDAQ:ALHC), Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL), The Goodyear Tire & Rubber Company (NASDAQ:GT), Pacific Premier Bancorp, Inc. (NASDAQ:PPBI), and Hudson Pacific Properties Inc (NYSE:HPP). All of these stocks’ market caps are similar to AVT’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
HCM 8 27401 2
QLYS 12 213773 -10
ALHC 17 93639 17
CBRL 16 163644 -10
GT 23 429776 -4
PPBI 10 139882 0
HPP 16 105147 -6
Average 14.6 167609 -1.6

View table here if you experience formatting issues.

As you can see these stocks had an average of 14.6 hedge funds with bullish positions and the average amount invested in these stocks was $168 million. That figure was $850 million in AVT’s case. The Goodyear Tire & Rubber Company (NASDAQ:GT) is the most popular stock in this table. On the other hand Hutchison China MediTech Limited (NASDAQ:HCM) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Avnet, Inc. (NYSE:AVT) is more popular among hedge funds. Our overall hedge fund sentiment score for AVT is 81.5. 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 24% in 2021 through July 9th and still beat the market by 6.7 percentage points. Unfortunately AVT wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on AVT were disappointed as the stock returned -4.2% since the end of the first quarter (through 7/9) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.

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