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

We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Activision Blizzard, Inc. (NASDAQ:ATVI) and determine whether hedge funds skillfully traded this stock.

Activision Blizzard, Inc. (NASDAQ:ATVI) was in 80 hedge funds’ portfolios at the end of September. The all time high for this statistic is 101. ATVI has seen an increase in hedge fund interest of late. There were 78 hedge funds in our database with ATVI holdings at the end of June. Our calculations also showed that ATVI isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so 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. Now let’s take a peek at the recent hedge fund action surrounding Activision Blizzard, Inc. (NASDAQ:ATVI).

Gil Simon of SoMa Equity Partners

Gil Simon of SoMa Equity Partners

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

At the end of the third quarter, a total of 80 of the hedge funds tracked by Insider Monkey were long this stock, a change of 3% from the second quarter of 2021. The graph below displays the number of hedge funds with bullish position in ATVI over the last 25 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, D E Shaw was the largest shareholder of Activision Blizzard, Inc. (NASDAQ:ATVI), with a stake worth $765.3 million reported as of the end of September. Trailing D E Shaw was Citadel Investment Group, which amassed a stake valued at $460.8 million. Alkeon Capital Management, SoMa Equity Partners, and Palestra Capital Management 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 3G Sahana Capital Management allocated the biggest weight to Activision Blizzard, Inc. (NASDAQ:ATVI), around 8.82% of its 13F portfolio. Fernbridge Capital Management is also relatively very bullish on the stock, dishing out 7.19 percent of its 13F equity portfolio to ATVI.

Now, key money managers have jumped into Activision Blizzard, Inc. (NASDAQ:ATVI) headfirst. Point72 Asset Management, managed by Steve Cohen, assembled the biggest position in Activision Blizzard, Inc. (NASDAQ:ATVI). Point72 Asset Management had $196.1 million invested in the company at the end of the quarter. Dan Loeb’s Third Point also made a $154.8 million investment in the stock during the quarter. The following funds were also among the new ATVI investors: Brandon Haley’s Holocene Advisors, Zach Schreiber’s Point State Capital, and Andreas Halvorsen’s Viking Global.

Let’s go over hedge fund activity in other stocks similar to Activision Blizzard, Inc. (NASDAQ:ATVI). We will take a look at Stellantis N.V. (NYSE:STLA), Ecolab Inc. (NYSE:ECL), Eaton Corporation plc (NYSE:ETN), Norfolk Southern Corp. (NYSE:NSC), Dominion Energy Inc. (NYSE:D), America Movil SAB de CV (NYSE:AMX), and NIO Inc. (NYSE:NIO). This group of stocks’ market valuations are closest to ATVI’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
STLA 24 1178890 -4
ECL 39 2551887 -9
ETN 45 1089775 5
NSC 46 1049404 -12
D 27 545194 -7
AMX 11 167723 -2
NIO 30 1138194 -4
Average 31.7 1103010 -4.7

View table here if you experience formatting issues.

As you can see these stocks had an average of 31.7 hedge funds with bullish positions and the average amount invested in these stocks was $1103 million. That figure was $4285 million in ATVI’s case. Norfolk Southern Corp. (NYSE:NSC) is the most popular stock in this table. On the other hand America Movil SAB de CV (NYSE:AMX) is the least popular one with only 11 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 80.8. 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 29.6% in 2021 and still managed to beat the market by another 3.6 percentage points. Hedge funds were somewhat right about betting on ATVI as the stock returned 2.1% since the end of September (through January 31st) and outperformed the top 5 hedge fund stocks but not the market. This is a rare phenomenon as top hedge fund stocks usually beat the market over the long-term.

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