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Were Hedge Funds Right About Dumping Avnet, Inc. (AVT)?

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. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. We are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article we look at how hedge funds traded Avnet, Inc. (NYSE:AVT) and determine whether the smart money was really smart about this stock.

Avnet, Inc. (NYSE:AVT) has experienced a decrease in hedge fund sentiment of late. Our calculations also showed that AVT 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.

To the average investor there are tons of methods stock traders have at their disposal to value their holdings. A duo of the most innovative methods are hedge fund and insider trading signals. We have shown that, historically, those who follow the top picks of the best investment managers can outperform their index-focused peers by a very impressive amount (see the details here).

Ric Dillon Diamond Hill Capital

Ric Dillon of Diamond Hill Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, on one site we found out that NBA champion Isiah Thomas is now the CEO of this cannabis company. The same site also talks about a snack manufacturer that’s growing at 30% annually. 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. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so if you have any good ideas send us an email. With all of this in mind we’re going to take a glance at the fresh hedge fund action surrounding Avnet, Inc. (NYSE:AVT).

What does smart money think about Avnet, Inc. (NYSE:AVT)?

At the end of the first quarter, a total of 24 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -27% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in AVT 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.

Among these funds, Pzena Investment Management held the most valuable stake in Avnet, Inc. (NYSE:AVT), which was worth $226.8 million at the end of the third quarter. On the second spot was AQR Capital Management which amassed $104.7 million worth of shares. D E Shaw, Diamond Hill Capital, and Polaris 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 Boardman Bay Capital Management allocated the biggest weight to Avnet, Inc. (NYSE:AVT), around 1.9% of its 13F portfolio. Pzena Investment Management is also relatively very bullish on the stock, setting aside 1.72 percent of its 13F equity portfolio to AVT.

Judging by the fact that Avnet, Inc. (NYSE:AVT) has faced falling interest from the entirety of the hedge funds we track, logic holds that there were a few hedgies that decided to sell off their entire stakes in the first quarter. Intriguingly, Noam Gottesman’s GLG Partners dropped the largest stake of the 750 funds monitored by Insider Monkey, comprising close to $11.5 million in stock, and Lee Ainslie’s Maverick Capital was right behind this move, as the fund dropped about $2.3 million worth. These moves are intriguing to say the least, as total hedge fund interest dropped by 9 funds in the first quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Avnet, Inc. (NYSE:AVT) but similarly valued. We will take a look at Werner Enterprises, Inc. (NASDAQ:WERN), Cenovus Energy Inc (NYSE:CVE), Companhia Energetica de Minas Gerais (NYSE:CIG), and Corporate Office Properties Trust (NYSE:OFC). All of these stocks’ market caps are similar to AVT’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
WERN 17 161749 -4
CVE 24 102988 -7
CIG 10 20207 1
OFC 17 158054 -4
Average 17 110750 -3.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $111 million. That figure was $453 million in AVT’s case. Cenovus Energy Inc (NYSE:CVE) is the most popular stock in this table. On the other hand Companhia Energetica de Minas Gerais (NYSE:CIG) is the least popular one with only 10 bullish hedge fund positions. Avnet, Inc. (NYSE:AVT) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 gained 12.3% in 2020 through June 30th but beat the market by 15.5 percentage points. Unfortunately AVT wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on AVT were disappointed as the stock returned 12% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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