Were Hedge Funds Right About Activision Blizzard, Inc. (ATVI)?

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. Insider Monkey finished processing 866 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of March 31st, 2020. What do these smart investors think about Activision Blizzard, Inc. (NASDAQ:ATVI)?

Activision Blizzard, Inc. (NASDAQ:ATVI) shareholders have witnessed a decrease in support from the world’s most elite money managers lately. Activision Blizzard, Inc. (NASDAQ:ATVI) was in 76 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 101. There were 81 hedge funds in our database with ATVI positions at the end of the fourth quarter. Our calculations also showed that ATVI isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

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 monthly stock picks returned 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Gabriel Plotkin Melvin Capital Management

At Insider Monkey, we scour multiple sources to uncover 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 EV 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. With all of this in mind we’re going to analyze the fresh hedge fund action surrounding Activision Blizzard, Inc. (NASDAQ:ATVI).

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

At the end of March, a total of 76 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -6% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards ATVI over the last 23 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 ATVI A Good Stock To Buy?

The largest stake in Activision Blizzard, Inc. (NASDAQ:ATVI) was held by Arrowstreet Capital, which reported holding $341.5 million worth of stock at the end of December. It was followed by Alkeon Capital Management with a $339.8 million position. Other investors bullish on the company included Holocene Advisors, D E Shaw, and SoMa Equity Partners. In terms of the portfolio weights assigned to each position Incline Global Management allocated the biggest weight to Activision Blizzard, Inc. (NASDAQ:ATVI), around 8.34% of its 13F portfolio. Fernbridge Capital Management is also relatively very bullish on the stock, dishing out 8.13 percent of its 13F equity portfolio to ATVI.

Judging by the fact that Activision Blizzard, Inc. (NASDAQ:ATVI) has faced bearish sentiment from the entirety of the hedge funds we track, it’s safe to say that there was a specific group of money managers who were dropping their positions entirely by the end of the first quarter. It’s worth mentioning that Aaron Cowen’s Suvretta Capital Management dropped the biggest investment of the “upper crust” of funds watched by Insider Monkey, valued at close to $184.3 million in stock, and Peter S. Park’s Park West Asset Management was right behind this move, as the fund cut about $68.2 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest dropped by 5 funds by the end of the first quarter.

Let’s now review hedge fund activity in other stocks similar to Activision Blizzard, Inc. (NASDAQ:ATVI). These stocks are ConocoPhillips (NYSE:COP), NetEase, Inc (NASDAQ:NTES), Chubb Limited (NYSE:CB), Becton, Dickinson and Company (NYSE:BDX), Illinois Tool Works Inc. (NYSE:ITW), Norfolk Southern Corp. (NYSE:NSC), and KE Holdings Inc (NYSE:BEKE). This group of stocks’ market valuations are similar to ATVI’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
COP 51 1205455 2
NTES 32 3501491 -6
CB 41 1605208 7
BDX 65 3732947 0
ITW 33 411615 -7
NSC 46 898621 2
BEKE 33 2308833 3
Average 43 1952024 0.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 43 hedge funds with bullish positions and the average amount invested in these stocks was $1952 million. That figure was $3581 million in ATVI’s case. Becton, Dickinson and Company (NYSE:BDX) is the most popular stock in this table. On the other hand NetEase, Inc (NASDAQ:NTES) is the least popular one with only 32 bullish hedge fund positions. Compared to these stocks Activision Blizzard, Inc. (NASDAQ:ATVI) is more popular among hedge funds. Our overall hedge fund sentiment score for ATVI is 72.6. 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 25.8% in 2021 through August 6th and still beat the market by 6.7 percentage points. Unfortunately ATVI wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on ATVI were disappointed as the stock returned -10.9% since the end of the first quarter (through 8/6) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 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.