Hedge Funds Warming Up To Vistra Energy Corp. (VST)

Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 750 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about Vistra Energy Corp. (NYSE:VST) in this article.

Vistra Energy Corp. (NYSE:VST) was in 42 hedge funds’ portfolios at the end of the third quarter of 2019. VST investors should pay attention to an increase in enthusiasm from smart money in recent months. There were 39 hedge funds in our database with VST positions at the end of the previous quarter. Our calculations also showed that VST isn’t among the 30 most popular stocks among hedge funds.

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’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.


Howard Marks of Oaktree Capital Management

Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. We’re going to go over the fresh hedge fund action surrounding Vistra Energy Corp. (NYSE:VST).

Hedge fund activity in Vistra Energy Corp. (NYSE:VST)

Heading into the fourth quarter of 2019, a total of 42 of the hedge funds tracked by Insider Monkey were long this stock, a change of 8% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in VST over the last 17 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).


The largest stake in Vistra Energy Corp. (NYSE:VST) was held by Oaktree Capital Management, which reported holding $729.1 million worth of stock at the end of September. It was followed by Highland Capital Management with a $211.3 million position. Other investors bullish on the company included Scopia Capital, Adage Capital Management, and Avenue Capital. In terms of the portfolio weights assigned to each position Avenue Capital allocated the biggest weight to Vistra Energy Corp. (NYSE:VST), around 56.19% of its portfolio. Farmstead Capital Management is also relatively very bullish on the stock, setting aside 42.51 percent of its 13F equity portfolio to VST.

Consequently, some big names have jumped into Vistra Energy Corp. (NYSE:VST) headfirst. Winton Capital Management, managed by David Harding, created the biggest position in Vistra Energy Corp. (NYSE:VST). Winton Capital Management had $8.8 million invested in the company at the end of the quarter. Joel Greenblatt’s Gotham Asset Management also made a $5.1 million investment in the stock during the quarter. The following funds were also among the new VST investors: Peter J. Hark’s Shelter Harbor Advisors, Guy Shahar’s DSAM Partners, and Matthew Hulsizer’s PEAK6 Capital Management.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Vistra Energy Corp. (NYSE:VST) but similarly valued. We will take a look at Fortinet Inc (NASDAQ:FTNT), Genmab A/S (NASDAQ:GMAB), International Flavors & Fragrances Inc (NYSE:IFF), and SS&C Technologies Holdings, Inc. (NASDAQ:SSNC). This group of stocks’ market valuations resemble VST’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
FTNT 38 1187931 4
GMAB 10 136229 10
IFF 19 202887 1
SSNC 45 1483434 4
Average 28 752620 4.75

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 $753 million. That figure was $2382 million in VST’s case. SS&C Technologies Holdings, Inc. (NASDAQ:SSNC) is the most popular stock in this table. On the other hand Genmab A/S (NASDAQ:GMAB) is the least popular one with only 10 bullish hedge fund positions. Vistra Energy Corp. (NYSE:VST) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 34.7% in 2019 through November 22nd and outperformed the S&P 500 ETF (SPY) by 8.5 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 -0.7% during the fourth quarter (through 11/22) 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 many of these stocks already outperformed the market so far this year.

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