Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Activision Blizzard, Inc. (NASDAQ:ATVI).
Is Activision Blizzard (ATVI) stock a buy or sell? Money managers were reducing their bets on the stock. The number of long hedge fund positions fell by 12 lately. Activision Blizzard, Inc. (NASDAQ:ATVI) was in 81 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 101. Our calculations also showed that ATVI isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 S&P 500 ETFs by more than 124 percentage points since March 2017 (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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
Gil Simon of SoMa Equity Partners
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. Recently Oregon became the first state to legalize psychedelic mushrooms which are shown to have promising results in treating depression, addiction, and PTSD in early stage academic studies. So, we are checking out this psychedelic drug stock idea right now. We go through lists like the 10 best hydrogen fuel cell 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 (or at the end of this article). Keeping this in mind we’re going to view the fresh hedge fund action surrounding Activision Blizzard, Inc. (NASDAQ:ATVI).
Do Hedge Funds Think ATVI Is A Good Stock To Buy Now?
At fourth quarter’s end, a total of 81 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -13% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards ATVI over the last 22 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Activision Blizzard, Inc. (NASDAQ:ATVI) was held by Citadel Investment Group, which reported holding $461 million worth of stock at the end of December. It was followed by Alkeon Capital Management with a $315.2 million position. Other investors bullish on the company included Arrowstreet Capital, SoMa Equity Partners, and Holocene Advisors. In terms of the portfolio weights assigned to each position Fernbridge Capital Management allocated the biggest weight to Activision Blizzard, Inc. (NASDAQ:ATVI), around 9.22% of its 13F portfolio. Incline Global Management is also relatively very bullish on the stock, dishing out 7.64 percent of its 13F equity portfolio to ATVI.
Due to the fact that Activision Blizzard, Inc. (NASDAQ:ATVI) has faced falling interest from the aggregate hedge fund industry, it’s easy to see that there was a specific group of money managers that slashed their entire stakes by the end of the fourth quarter. At the top of the heap, John Armitage’s Egerton Capital Limited cut the largest investment of the “upper crust” of funds watched by Insider Monkey, comprising about $107.4 million in stock, and Glen Kacher’s Light Street Capital was right behind this move, as the fund cut about $43.5 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest was cut by 12 funds by the end of the fourth quarter.
Let’s also examine hedge fund activity in other stocks similar to Activision Blizzard, Inc. (NASDAQ:ATVI). These stocks are China Petroleum & Chemical Corp (NYSE:SNP), U.S. Bancorp (NYSE:USB), Chubb Limited (NYSE:CB), BP plc (NYSE:BP), CSX Corporation (NYSE:CSX), FedEx Corporation (NYSE:FDX), and Crown Castle International Corp. (NYSE:CCI). This group of stocks’ market values are closest to ATVI’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SNP | 13 | 196413 | 5 |
| USB | 60 | 8134585 | 12 |
| CB | 34 | 1188375 | -11 |
| BP | 29 | 927478 | -1 |
| CSX | 58 | 3315285 | 0 |
| FDX | 63 | 2012460 | -8 |
| CCI | 40 | 2071704 | -2 |
| Average | 42.4 | 2549471 | -0.7 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 42.4 hedge funds with bullish positions and the average amount invested in these stocks was $2549 million. That figure was $3739 million in ATVI’s case. FedEx Corporation (NYSE:FDX) is the most popular stock in this table. On the other hand China Petroleum & Chemical Corp (NYSE:SNP) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks Activision Blizzard, Inc. (NASDAQ:ATVI) is more popular among hedge funds. Our overall hedge fund sentiment score for ATVI is 67.1. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 7% in 2021 through March 12th and still beat the market by 1.6 percentage points. Unfortunately ATVI wasn’t nearly as popular as these 30 stocks and hedge funds that were betting on ATVI were disappointed as the stock returned 0.2% since the end of the fourth quarter (through 3/12) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.
Follow Activision Blizzard Inc. (NASDAQ:ATVI)
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Disclosure: None. This article was originally published at Insider Monkey.
