Is Avalara, Inc. (AVLR) A Good Stock To Buy?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We have processed the filings of the more than 866 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their March 31st holdings, data that is available nowhere else. Should you consider Avalara, Inc. (NYSE:AVLR) for your portfolio? We’ll look to this invaluable collective wisdom for the answer.

Is AVLR a good stock to buy? Hedge funds were in a bearish mood. The number of bullish hedge fund bets dropped by 15 recently. Avalara, Inc. (NYSE:AVLR) was in 41 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 56. Our calculations also showed that AVLR isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 56 hedge funds in our database with AVLR positions at the end of the fourth quarter.

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At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation, which is why we are checking out this inflation play. We go through lists like 10 best gold stocks to buy to identify promising stocks. 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 we’re going to take a look at the recent hedge fund action encompassing Avalara, Inc. (NYSE:AVLR).

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

Heading into the second quarter of 2021, a total of 41 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -27% from the previous quarter. By comparison, 34 hedge funds held shares or bullish call options in AVLR a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Alkeon Capital Management was the largest shareholder of Avalara, Inc. (NYSE:AVLR), with a stake worth $351.7 million reported as of the end of March. Trailing Alkeon Capital Management was Tensile Capital, which amassed a stake valued at $148.9 million. Renaissance Technologies, Echo Street Capital Management, and SQN Investors were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Tensile Capital allocated the biggest weight to Avalara, Inc. (NYSE:AVLR), around 19.54% of its 13F portfolio. Ivy Lane Capital is also relatively very bullish on the stock, setting aside 11.83 percent of its 13F equity portfolio to AVLR.

Due to the fact that Avalara, Inc. (NYSE:AVLR) has witnessed declining sentiment from the entirety of the hedge funds we track, we can see that there is a sect of funds that decided to sell off their entire stakes in the first quarter. Intriguingly, Josh Resnick’s Jericho Capital Asset Management dropped the biggest investment of the “upper crust” of funds tracked by Insider Monkey, comprising an estimated $38.4 million in stock. Ben Jacobs’s fund, Anomaly Capital Management, also said goodbye to its stock, about $25.5 million worth. These bearish behaviors are interesting, as total hedge fund interest was cut by 15 funds in the first quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Avalara, Inc. (NYSE:AVLR). These stocks are Allegion plc (NYSE:ALLE), Newell Brands Inc. (NASDAQ:NWL), LPL Financial Holdings Inc (NASDAQ:LPLA), Westlake Chemical Corporation (NYSE:WLK), Universal Health Services, Inc. (NYSE:UHS), Lamb Weston Holdings, Inc. (NYSE:LW), and IPG Photonics Corporation (NASDAQ:IPGP). This group of stocks’ market caps match AVLR’s market cap.

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As you can see these stocks had an average of 32.4 hedge funds with bullish positions and the average amount invested in these stocks was $946 million. That figure was $994 million in AVLR’s case. Universal Health Services, Inc. (NYSE:UHS) is the most popular stock in this table. On the other hand Newell Brands Inc. (NASDAQ:NWL) is the least popular one with only 24 bullish hedge fund positions. Avalara, Inc. (NYSE:AVLR) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for AVLR is 56.7. 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 17.4% in 2021 through June 18th and still beat the market by 6.1 percentage points. Hedge funds were also right about betting on AVLR as the stock returned 15.3% since the end of Q1 (through 6/18) 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.