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Vistra Energy Corp. (VST): Hedge Funds Taking Some Chips Off The Table

We at Insider Monkey have gone over 821 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, near the height of the coronavirus market crash. In this article, we look at what those funds think of Vistra Energy Corp. (NYSE:VST) based on that data.

Vistra Energy Corp. (NYSE:VST) has seen a decrease in hedge fund sentiment of late. VST was in 39 hedge funds’ portfolios at the end of March. There were 49 hedge funds in our database with VST positions at the end of the previous quarter. Our calculations also showed that VST isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 51 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

AVENUE CAPITAL

Marc Lasry of Avenue Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to check out the latest hedge fund action encompassing Vistra Energy Corp. (NYSE:VST).

How have hedgies been trading Vistra Energy Corp. (NYSE:VST)?

At the end of the first quarter, a total of 39 of the hedge funds tracked by Insider Monkey were long this stock, a change of -20% from one quarter earlier. On the other hand, there were a total of 48 hedge funds with a bullish position in VST a year ago. With hedge funds’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were upping their holdings considerably (or already accumulated large positions).

Among these funds, Oaktree Capital Management held the most valuable stake in Vistra Energy Corp. (NYSE:VST), which was worth $483.2 million at the end of the third quarter. On the second spot was GoldenTree Asset Management which amassed $142.3 million worth of shares. Scopia Capital, Avenue Capital, and Angelo Gordon & Co 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 Avenue Capital allocated the biggest weight to Vistra Energy Corp. (NYSE:VST), around 84.26% of its 13F portfolio. GoldenTree Asset Management is also relatively very bullish on the stock, setting aside 26.33 percent of its 13F equity portfolio to VST.

Since Vistra Energy Corp. (NYSE:VST) has experienced a decline in interest from hedge fund managers, it’s safe to say that there was a specific group of hedgies that decided to sell off their entire stakes in the third quarter. At the top of the heap, Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors sold off the largest position of the 750 funds followed by Insider Monkey, worth close to $89.7 million in stock, and Phill Gross and Robert Atchinson’s Adage Capital Management was right behind this move, as the fund dropped about $78.2 million worth. These transactions are interesting, as aggregate hedge fund interest fell by 10 funds in the third quarter.

Let’s check out hedge fund activity in other stocks similar to Vistra Energy Corp. (NYSE:VST). These stocks are CenterPoint Energy, Inc. (NYSE:CNP), Nordson Corporation (NASDAQ:NDSN), Erie Indemnity Company (NASDAQ:ERIE), and Apollo Global Management, Inc. (NYSE:APO). This group of stocks’ market valuations resemble VST’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CNP 32 560894 2
NDSN 22 98925 -7
ERIE 17 63002 -3
APO 34 1487468 5
Average 26.25 552572 -0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 26.25 hedge funds with bullish positions and the average amount invested in these stocks was $553 million. That figure was $1440 million in VST’s case. Apollo Global Management , Inc. (NYSE:APO) is the most popular stock in this table. On the other hand Erie Indemnity Company (NASDAQ:ERIE) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks Vistra Energy Corp. (NYSE:VST) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks returned 8.3% in 2020 through the end of May but still managed to beat the market by 13.2 percentage points. Hedge funds were also right about betting on VST as the stock returned 28.1% so far in Q2 (through the end of May) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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