The 800+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the fourth quarter, which unveil their equity positions as of December 31st. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards Avalara, Inc. (NYSE:AVLR).
Is AVLR stock a buy or sell? Avalara, Inc. (NYSE:AVLR) was in 56 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 48. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. AVLR investors should pay attention to an increase in activity from the world’s largest hedge funds in recent months. There were 46 hedge funds in our database with AVLR positions at the end of the third quarter. Our calculations also showed that AVLR isn’t among the 30 most popular stocks among hedge funds (click for Q4 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 197% since March 2017 and outperformed the S&P 500 ETFs by more than 124 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Tim Woolley of Polar Capital
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. Recently Oregon became the first state to legalize psychedelic mushrooms which are shown to have promising results in treating depression, addiction, and PTSD in early stage academic studies. So, we are checking out this psychedelic drug stock idea right now. We go through lists like the 10 best biotech stocks to invest in to pick the next stock 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 (or at the end of this article). With all of this in mind we’re going to take a gander at the key hedge fund action surrounding Avalara, Inc. (NYSE:AVLR).
Do Hedge Funds Think AVLR Is A Good Stock To Buy Now?
At Q4’s end, a total of 56 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 22% from the third quarter of 2020. Below, you can check out the change in hedge fund sentiment towards AVLR over the last 22 quarters. With hedgies’ capital changing hands, there exists a select group of key hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
Among these funds, Alkeon Capital Management held the most valuable stake in Avalara, Inc. (NYSE:AVLR), which was worth $433.5 million at the end of the fourth quarter. On the second spot was Tensile Capital which amassed $210.3 million worth of shares. Renaissance Technologies, SQN Investors, and Polar Capital 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 Tensile Capital allocated the biggest weight to Avalara, Inc. (NYSE:AVLR), around 24.68% of its 13F portfolio. Ivy Lane Capital is also relatively very bullish on the stock, dishing out 14.15 percent of its 13F equity portfolio to AVLR.
Consequently, some big names have been driving this bullishness. Anomaly Capital Management, managed by Ben Jacobs, initiated the biggest position in Avalara, Inc. (NYSE:AVLR). Anomaly Capital Management had $25.5 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also made a $22.5 million investment in the stock during the quarter. The following funds were also among the new AVLR investors: Philip Timon’s Owls Nest Partners, Robert W. Koehn’s Ivy Lane Capital, and Joe Magyer’s Lakehouse Capital.
Let’s also examine hedge fund activity in other stocks similar to Avalara, Inc. (NYSE:AVLR). These stocks are Westinghouse Air Brake Technologies Corporation (NYSE:WAB), Wix.Com Ltd (NASDAQ:WIX), Liberty Global plc (NASDAQ:LBTYA), Black Knight, Inc. (NYSE:BKI), Natura &Co Holding S.A. (NYSE:NTCO), Sunrun Inc (NASDAQ:RUN), and iQIYI, Inc. (NASDAQ:IQ). This group of stocks’ market valuations are similar to AVLR’s market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WAB,45,2348711,7 WIX,37,999707,1 LBTYA,36,1123404,1 BKI,44,994940,3 NTCO,4,82302,0 RUN,48,3008231,19 IQ,30,1048707,12 Average,34.9,1372286,6.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 34.9 hedge funds with bullish positions and the average amount invested in these stocks was $1372 million. That figure was $1314 million in AVLR’s case. Sunrun Inc (NASDAQ:RUN) is the most popular stock in this table. On the other hand Natura &Co Holding S.A. (NYSE:NTCO) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Avalara, Inc. (NYSE:AVLR) is more popular among hedge funds. Our overall hedge fund sentiment score for AVLR is 90. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 5.3% in 2021 through March 19th and still beat the market by 0.8 percentage points. Unfortunately AVLR wasn’t nearly as popular as these 30 stocks and hedge funds that were betting on AVLR were disappointed as the stock returned -18.1% since the end of the fourth quarter (through 3/19) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 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.