In this article we are going to use hedge fund sentiment as a tool and determine whether Avanos Medical, Inc. (NYSE:AVNS) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Avanos Medical, Inc. (NYSE:AVNS) has seen an increase in activity from the world’s largest hedge funds in recent months. Avanos Medical, Inc. (NYSE:AVNS) was in 21 hedge funds’ portfolios at the end of September. The all time high for this statistic was previously 20. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that AVNS isn’t among the 30 most popular stocks among hedge funds (click for Q2 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. With all of this in mind let’s view the latest hedge fund action regarding Avanos Medical, Inc. (NYSE:AVNS).
Do Hedge Funds Think AVNS Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2021, a total of 21 of the hedge funds tracked by Insider Monkey were long this stock, a change of 31% from the second quarter of 2021. Below, you can check out the change in hedge fund sentiment towards AVNS over the last 25 quarters. With the smart money’s sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).
The largest stake in Avanos Medical, Inc. (NYSE:AVNS) was held by Paradice Investment Management, which reported holding $96.3 million worth of stock at the end of September. It was followed by RGM Capital with a $78.7 million position. Other investors bullish on the company included D E Shaw, Balyasny Asset Management, and Two Sigma Advisors. In terms of the portfolio weights assigned to each position Paradice Investment Management allocated the biggest weight to Avanos Medical, Inc. (NYSE:AVNS), around 4.36% of its 13F portfolio. RGM Capital is also relatively very bullish on the stock, earmarking 3.86 percent of its 13F equity portfolio to AVNS.
As aggregate interest increased, key hedge funds have jumped into Avanos Medical, Inc. (NYSE:AVNS) headfirst. Balyasny Asset Management, managed by Dmitry Balyasny, established the biggest position in Avanos Medical, Inc. (NYSE:AVNS). Balyasny Asset Management had $10.3 million invested in the company at the end of the quarter. John Overdeck and David Siegel’s Two Sigma Advisors also initiated a $9.8 million position during the quarter. The other funds with new positions in the stock are Greg Eisner’s Engineers Gate Manager, Brandon Haley’s Holocene Advisors, and Paul Marshall and Ian Wace’s Marshall Wace LLP.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Avanos Medical, Inc. (NYSE:AVNS) but similarly valued. These stocks are Formula Systems (1985) Ltd. (NASDAQ:FORTY), Centessa Pharmaceuticals Limited (NASDAQ:CNTA), SiriusPoint Ltd. (NYSE:SPNT), Youdao, Inc. (NYSE:DAO), Meritor Inc (NYSE:MTOR), Stride, Inc. (NYSE:LRN), and Encore Capital Group, Inc. (NASDAQ:ECPG). This group of stocks’ market caps match AVNS’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $109 million. That figure was $238 million in AVNS’s case. Stride, Inc. (NYSE:LRN) is the most popular stock in this table. On the other hand Formula Systems (1985) Ltd. (NASDAQ:FORTY) is the least popular one with only 1 bullish hedge fund positions. Avanos Medical, Inc. (NYSE:AVNS) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for AVNS is 90. 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 29.6% in 2021 and still beat the market by 3.6 percentage points. Hedge funds were also right about betting on AVNS as the stock returned 11.1% since the end of Q3 (through 12/31) 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.