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Vistra Energy Corp. (VST): Are Hedge Funds Right About This Stock?

At Insider Monkey we follow around 700 of the best-performing investors and even though many of them lost money in the last couple of months (70% of hedge funds lost money in October whereas S&P 500 ETF lost about 7%), the history teaches us that over the long-run they still manage to beat the market, which is why it can be profitable for us to imitate their activity. Of course, even the best money managers can sometimes get it wrong, but following some of their picks gives us a better chance to outperform the crowd than picking a random stock and this is where our research comes in.

Vistra Energy Corp. (NYSE:VST) was in 38 hedge funds’ portfolios at the end of the third quarter of 2018. VST has seen a decrease in support from the world’s most elite money managers in recent months. There were 43 hedge funds in our database with VST holdings at the end of the previous quarter. Our calculations also showed that VST isn’t among the 30 most popular stocks among hedge funds.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 6.3% year to date (through December 3rd) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 18 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Howard Marks OAKTREE CAPITAL MANAGEMENT

Let’s take a peek at the fresh hedge fund action surrounding Vistra Energy Corp. (NYSE:VST).

What have hedge funds been doing with Vistra Energy Corp. (NYSE:VST)?

At the end of the third quarter, a total of 38 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -12% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards VST over the last 13 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).

VST_dec2018

When looking at the institutional investors followed by Insider Monkey, Oaktree Capital Management, managed by Howard Marks, holds the biggest position in Vistra Energy Corp. (NYSE:VST). Oaktree Capital Management has a $888.6 million position in the stock, comprising 12% of its 13F portfolio. The second largest stake is held by Scopia Capital, managed by Matt Sirovich and Jeremy Mindich, which holds a $300.3 million position; 5.8% of its 13F portfolio is allocated to the company. Other members of the smart money that are bullish comprise Jonathan Barrett and Paul Segal’s Luminus Management, Mark T. Gallogly’s Centerbridge Partners and James Dondero’s Highland Capital Management.

Seeing as Vistra Energy Corp. (NYSE:VST) has witnessed falling interest from hedge fund managers, logic holds that there lies a certain “tier” of hedge funds that elected to cut their entire stakes last quarter. It’s worth mentioning that John Paulson’s Paulson & Co said goodbye to the biggest position of all the hedgies watched by Insider Monkey, totaling about $87.5 million in stock, and Jos Shaver’s Electron Capital Partners was right behind this move, as the fund dumped about $28.5 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest dropped by 5 funds last quarter.

Let’s check out 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 Coca-Cola FEMSA, S.A.B. de C.V. (NYSE:KOF), Icahn Enterprises LP (NASDAQ:IEP), Cadence Design Systems Inc (NASDAQ:CDNS), and Expeditors International of Washington, Inc. (NASDAQ:EXPD). This group of stocks’ market caps match VST’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
KOF 8 474382 -1
IEP 4 12234177 1
CDNS 32 1309588 10
EXPD 22 709696 -6
Average 16.5 3681961 1

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.5 hedge funds with bullish positions and the average amount invested in these stocks was $3.68 billion. That figure was $3.61 million in VST’s case. Cadence Design Systems Inc (NASDAQ:CDNS) is the most popular stock in this table. On the other hand Icahn Enterprises LP (NASDAQ:IEP) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Vistra Energy Corp. (NYSE:VST) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.

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

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