As we already know from media reports and hedge fund investor letters, hedge funds delivered their best returns in a decade. Most investors who decided to stick with hedge funds after a rough 2018 recouped their losses by the end of the fourth quarter of 2019. A significant number of hedge funds continued their strong performance in 2020 and 2021 as well. We get to see hedge funds' thoughts towards the market and individual stocks by aggregating their quarterly portfolio movements and reading their investor letters. In this article, we will particularly take a look at what hedge funds think about Activision Blizzard, Inc. (NASDAQ:ATVI).
Is Activision Blizzard, Inc. (NASDAQ:ATVI) a bargain? Hedge funds were in a bearish mood. The number of bullish hedge fund bets decreased by 5 in recent months. 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. Our calculations also showed that ATVI isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 81 hedge funds in our database with ATVI positions at the end of the fourth quarter.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 115 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Gil Simon of SoMa Equity Partners
At Insider Monkey we leave no stone unturned when looking for 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 hydrogen fuel cell 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. Now we're going to take a peek at the fresh hedge fund action encompassing 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. The graph below displays the number of hedge funds with bullish position in ATVI over the last 23 quarters. With hedge funds' positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, holds the number one position in Activision Blizzard, Inc. (NASDAQ:ATVI). Arrowstreet Capital has a $341.5 million position in the stock, comprising 0.5% of its 13F portfolio. The second largest stake is held by Alkeon Capital Management, managed by Panayotis Takis Sparaggis, which holds a $339.8 million position; 0.5% of its 13F portfolio is allocated to the company. Remaining professional money managers that hold long positions include Brandon Haley's Holocene Advisors, D. E. Shaw's D E Shaw and Gil Simon's 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, setting aside 8.13 percent of its 13F equity portfolio to ATVI.
Due to the fact that Activision Blizzard, Inc. (NASDAQ:ATVI) has witnessed a decline in interest from the aggregate hedge fund industry, it's safe to say that there is a sect of money managers who were dropping their positions entirely by the end of the first quarter. At the top of the heap, Aaron Cowen's Suvretta Capital Management dumped the biggest investment of the 750 funds tracked by Insider Monkey, comprising close to $184.3 million in stock. Peter S. Park's fund, Park West Asset Management, also dumped its stock, about $68.2 million worth. These moves are important to note, as total hedge fund interest was cut by 5 funds by the end of the first quarter.
Let's check out hedge fund activity in other stocks similar to Activision Blizzard, Inc. (NASDAQ:ATVI). We will take a look at 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). All of these stocks' market caps are similar to ATVI's market cap.
[table] 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 [/table]
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 17.2% in 2021 through June 11th and still beat the market by 3.3 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 6% since the end of the first quarter (through 6/11) 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.
Get real-time email alerts: Follow Activision Blizzard Inc. (NASDAQ:ATVI)
Disclosure: None. This article was originally published at Insider Monkey.