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Hedge Funds Have Never Been This Bullish On Vistra Energy Corp. (VST)

Like everyone else, elite investors make mistakes. Some of their top consensus picks, such as Amazon, Facebook and Alibaba, have not done well in Q4 due to various reasons. Nevertheless, the data show elite investors’ consensus picks have done well on average over the long-term. The top 20 stocks among hedge funds beat the S&P 500 Index ETF by more than 6 percentage points so far this year. Because their consensus picks have done well, we pay attention to what elite funds think before doing extensive research on a stock. In this article, we take a closer look at Vistra Energy Corp. (NYSE:VST) from the perspective of those elite funds.

Is Vistra Energy Corp. (NYSE:VST) going to take off soon? Money managers are taking a bullish view. The number of bullish hedge fund bets went up by 4 lately. Our calculations also showed that vst isn’t among the 30 most popular stocks among hedge funds. VST was in 48 hedge funds’ portfolios at the end of March. There were 44 hedge funds in our database with VST positions at the end of the previous 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. 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 40 percentage points since May 2014 through May 30, 2019 (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 30.9% through May 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Howard Marks OAKTREE CAPITAL MANAGEMENT

Let’s take a glance at the new hedge fund action surrounding Vistra Energy Corp. (NYSE:VST).

What does the smart money think about Vistra Energy Corp. (NYSE:VST)?

Heading into the second quarter of 2019, a total of 48 of the hedge funds tracked by Insider Monkey were long this stock, a change of 9% from the previous quarter. The graph below displays the number of hedge funds with bullish position in VST over the last 15 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).

No of Hedge Funds with VST Positions

More specifically, Oaktree Capital Management was the largest shareholder of Vistra Energy Corp. (NYSE:VST), with a stake worth $626.1 million reported as of the end of March. Trailing Oaktree Capital Management was Scopia Capital, which amassed a stake valued at $344.4 million. Highland Capital Management, Adage Capital Management, and AQR Capital Management were also very fond of the stock, giving the stock large weights in their portfolios.

As aggregate interest increased, key money managers have been driving this bullishness. D E Shaw, managed by D. E. Shaw, established the most outsized position in Vistra Energy Corp. (NYSE:VST). D E Shaw had $32.1 million invested in the company at the end of the quarter. Steve Cohen’s Point72 Asset Management also made a $23 million investment in the stock during the quarter. The other funds with new positions in the stock are Charles Davidson and Joseph Jacobs’s Wexford Capital, Andrew Weiss’s Weiss Asset Management, and Mark Travis’s Intrepid Capital Management.

Let’s now take a look at hedge fund activity in other stocks similar to Vistra Energy Corp. (NYSE:VST). These stocks are HEICO Corporation (NYSE:HEI), Celanese Corporation (NYSE:CE), Martin Marietta Materials, Inc. (NYSE:MLM), and TransUnion (NYSE:TRU). All of these stocks’ market caps are similar to VST’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
HEI 26 744050 -5
CE 21 594377 -5
MLM 36 2138083 2
TRU 29 1570292 1
Average 28 1261701 -1.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 28 hedge funds with bullish positions and the average amount invested in these stocks was $1262 million. That figure was $3073 million in VST’s case. Martin Marietta Materials, Inc. (NYSE:MLM) is the most popular stock in this table. On the other hand Celanese Corporation (NYSE:CE) is the least popular one with only 21 bullish hedge fund positions. Compared to these stocks Vistra Energy Corp. (NYSE:VST) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately VST wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on VST were disappointed as the stock returned -10% during the same period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market in Q2.

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

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