Is Avantor (AVTR) Stock A Buy or Sell?

While the market driven by short-term sentiment influenced by the accommodative interest rate environment in the US, virus news and stimulus spending, many smart money investors are starting to get cautious towards the current bull run since March and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Avantor, Inc. (NYSE:AVTR).

Is AVTR stock a buy or sell? Hedge fund interest in Avantor, Inc. (NYSE:AVTR) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that AVTR isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings). The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Healthpeak Properties, Inc. (NYSE:PEAK), Hess Corporation (NYSE:HES), and Ulta Beauty, Inc. (NASDAQ:ULTA) to gather more data points.

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).

Third Point

Dan Loeb of Third Point

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. 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 let’s check out the latest hedge fund action encompassing Avantor, Inc. (NYSE:AVTR).

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

At the end of the fourth quarter, a total of 56 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards AVTR over the last 22 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is AVTR A Good Stock To Buy?

When looking at the institutional investors followed by Insider Monkey, Andreas Halvorsen’s Viking Global has the number one position in Avantor, Inc. (NYSE:AVTR), worth close to $376 million, accounting for 1% of its total 13F portfolio. Sitting at the No. 2 spot is Third Point, managed by Dan Loeb, which holds a $309.7 million position; the fund has 2.4% of its 13F portfolio invested in the stock. Remaining peers that are bullish consist of Andrew Immerman and Jeremy Schiffman’s Palestra Capital Management, Ken Griffin’s Citadel Investment Group and Israel Englander’s Millennium Management. In terms of the portfolio weights assigned to each position Highside Global Management allocated the biggest weight to Avantor, Inc. (NYSE:AVTR), around 6.65% of its 13F portfolio. Highline Capital Management is also relatively very bullish on the stock, dishing out 5.14 percent of its 13F equity portfolio to AVTR.

Since Avantor, Inc. (NYSE:AVTR) has witnessed declining sentiment from the aggregate hedge fund industry, it’s safe to say that there exists a select few money managers that elected to cut their full holdings by the end of the fourth quarter. It’s worth mentioning that Doug Silverman and Alexander Klabin’s Senator Investment Group dumped the biggest stake of the 750 funds monitored by Insider Monkey, comprising an estimated $13.2 million in stock, and Jeffrey Talpins’s Element Capital Management was right behind this move, as the fund dropped about $12.1 million worth. These moves are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s go over hedge fund activity in other stocks similar to Avantor, Inc. (NYSE:AVTR). These stocks are Healthpeak Properties, Inc. (NYSE:PEAK), Hess Corporation (NYSE:HES), Ulta Beauty, Inc. (NASDAQ:ULTA), Steris Plc (NYSE:STE), Horizon Therapeutics Public Limited Company (NASDAQ:HZNP), Occidental Petroleum Corporation (NYSE:OXY), and Expeditors International of Washington (NASDAQ:EXPD). This group of stocks’ market caps resemble AVTR’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PEAK 22 262480 0
HES 33 366330 -2
ULTA 43 1340650 12
STE 36 784186 6
HZNP 55 3793427 -6
OXY 49 2151233 6
EXPD 25 477813 -6
Average 37.6 1310874 1.4

View table here if you experience formatting issues.

As you can see these stocks had an average of 37.6 hedge funds with bullish positions and the average amount invested in these stocks was $1311 million. That figure was $2219 million in AVTR’s case. Horizon Therapeutics Public Limited Company (NASDAQ:HZNP) is the most popular stock in this table. On the other hand Healthpeak Properties, Inc. (NYSE:PEAK) is the least popular one with only 22 bullish hedge fund positions. Compared to these stocks Avantor, Inc. (NYSE:AVTR) is more popular among hedge funds. Our overall hedge fund sentiment score for AVTR is 85. 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 5.3% in 2021 through March 19th and still beat the market by 0.8 percentage points. Unfortunately AVTR wasn’t nearly as popular as these 30 stocks and hedge funds that were betting on AVTR were disappointed as the stock returned 2% since the end of the fourth quarter (through 3/19) 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.

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