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Is Avista Corp (AVA) Going to Burn These Hedge Funds?

We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).

In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of June. At Insider Monkey, we follow nearly 835 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Avista Corp (NYSE:AVA), so let’s take a closer look at the sentiment that surrounds it in the current quarter.

Avista Corp (NYSE:AVA) has experienced a decrease in support from the world’s most elite money managers in recent months. Our calculations also showed that AVA isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).

In the financial world there are tons of metrics stock traders can use to size up publicly traded companies. Two of the most under-the-radar metrics are hedge fund and insider trading sentiment. Our researchers have shown that, historically, those who follow the top picks of the top investment managers can outperform their index-focused peers by a solid amount (see the details here).

David E. Shaw of D.E. Shaw

David E. Shaw of D.E. Shaw

We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s take a glance at the key hedge fund action regarding Avista Corp (NYSE:AVA).

What does smart money think about Avista Corp (NYSE:AVA)?

At the end of the fourth quarter, a total of 15 of the hedge funds tracked by Insider Monkey were long this stock, a change of -12% from the previous quarter. The graph below displays the number of hedge funds with bullish position in AVA over the last 18 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.

Is AVA A Good Stock To Buy?

Among these funds, Renaissance Technologies held the most valuable stake in Avista Corp (NYSE:AVA), which was worth $114.6 million at the end of the third quarter. On the second spot was D E Shaw which amassed $10.3 million worth of shares. GLG Partners, Winton Capital Management, and Holocene Advisors 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 Arjuna Capital allocated the biggest weight to Avista Corp (NYSE:AVA), around 0.45% of its 13F portfolio. AlphaCrest Capital Management is also relatively very bullish on the stock, designating 0.13 percent of its 13F equity portfolio to AVA.

Seeing as Avista Corp (NYSE:AVA) has witnessed a decline in interest from the entirety of the hedge funds we track, it’s easy to see that there lies a certain “tier” of fund managers that decided to sell off their entire stakes in the third quarter. At the top of the heap, Steve Cohen’s Point72 Asset Management cut the biggest position of the “upper crust” of funds watched by Insider Monkey, valued at about $1.2 million in stock, and Ken Griffin’s Citadel Investment Group was right behind this move, as the fund sold off about $0.2 million worth. These bearish behaviors are important to note, as total hedge fund interest was cut by 2 funds in the third quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Avista Corp (NYSE:AVA) but similarly valued. These stocks are Houlihan Lokey Inc (NYSE:HLI), Nextera Energy Partners LP (NYSE:NEP), Mantech International Corp (NASDAQ:MANT), and Enphase Energy Inc (NASDAQ:ENPH). This group of stocks’ market values are closest to AVA’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
HLI 10 128406 -7
NEP 17 127327 1
MANT 23 49724 7
ENPH 39 443293 6
Average 22.25 187188 1.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 22.25 hedge funds with bullish positions and the average amount invested in these stocks was $187 million. That figure was $149 million in AVA’s case. Enphase Energy Inc (NASDAQ:ENPH) is the most popular stock in this table. On the other hand Houlihan Lokey Inc (NYSE:HLI) is the least popular one with only 10 bullish hedge fund positions. Avista Corp (NYSE:AVA) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but beat the market by 5.5 percentage points. A small number of hedge funds were also right about betting on AVA, though not to the same extent, as the stock returned -21.9% during the same time period and outperformed the market.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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

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