Is Vistra (VST) A Good Stock To Buy?

This post was originally published on this site

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 have processed the filings of the more than 887 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their December 31st holdings, data that is available nowhere else. Should you consider Vistra Corp. (NYSE:VST) for your portfolio? We’ll look to this invaluable collective wisdom for the answer.

Is Vistra Corp. (NYSE:VST) a good stock to buy? Prominent investors were reducing their bets on the stock. The number of bullish hedge fund positions were cut by 6 lately. Vistra Corp. (NYSE:VST) was in 39 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 49. Our calculations also showed that VST 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.

Nick Thakore of Diametric Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 10 best battery stocks to buy to identify the next stock with 10x upside potential. 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 website. Keeping this in mind let’s check out the recent hedge fund action regarding Vistra Corp. (NYSE:VST).

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

At the end of the fourth quarter, a total of 39 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -13% from the third quarter of 2020. Below, you can check out the change in hedge fund sentiment towards VST over the last 22 quarters. With hedgies’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Oaktree Capital Management, managed by Howard Marks, holds the most valuable position in Vistra Corp. (NYSE:VST). Oaktree Capital Management has a $595.3 million position in the stock, comprising 10.3% of its 13F portfolio. The second largest stake of Renaissance Technologies, with a $142.9 million position; 0.2% of its 13F portfolio is allocated to the stock. Other hedge funds and institutional investors with similar optimism include Marc Lasry’s Avenue Capital, John M. Angelo and Michael L. Gordon’s Angelo Gordon & Co and Steven Tananbaum’s GoldenTree Asset Management. In terms of the portfolio weights assigned to each position Avenue Capital allocated the biggest weight to Vistra Corp. (NYSE:VST), around 48.06% of its 13F portfolio. Oaktree Capital Management is also relatively very bullish on the stock, designating 10.3 percent of its 13F equity portfolio to VST.

Because Vistra Corp. (NYSE:VST) has witnessed falling interest from the aggregate hedge fund industry, it’s easy to see that there was a specific group of hedgies that slashed their entire stakes last quarter. Intriguingly, Daniel S. Och’s OZ Management said goodbye to the largest position of the 750 funds monitored by Insider Monkey, comprising about $66.4 million in stock. Matt Sirovich and Jeremy Mindich’s fund, Scopia Capital, also cut its stock, about $47.7 million worth. These bearish behaviors are important to note, as total hedge fund interest dropped by 6 funds last quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Vistra Corp. (NYSE:VST) but similarly valued. These stocks are Lear Corporation (NYSE:LEA), Henry Schein, Inc. (NASDAQ:HSIC), GFL Environmental Inc. (NYSE:GFL), MGM Growth Properties LLC (NYSE:MGP), Kingsoft Cloud Holdings Limited (NASDAQ:KC), American Homes 4 Rent (NYSE:AMH), and Magellan Midstream Partners, L.P. (NYSE:MMP). This group of stocks’ market values are similar to VST’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
LEA 36 1208598 -8
HSIC 33 1225089 -7
GFL 18 448705 -2
MGP 29 524525 -1
KC 20 189726 -9
AMH 27 503512 3
MMP 22 146290 2
Average 26.4 606635 -3.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 26.4 hedge funds with bullish positions and the average amount invested in these stocks was $607 million. That figure was $1365 million in VST’s case. Lear Corporation (NYSE:LEA) is the most popular stock in this table. On the other hand GFL Environmental Inc. (NYSE:GFL) is the least popular one with only 18 bullish hedge fund positions. Compared to these stocks Vistra Corp. (NYSE:VST) is more popular among hedge funds. Our overall hedge fund sentiment score for VST is 72.9. 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 VST wasn’t nearly as popular as these 30 stocks and hedge funds that were betting on VST were disappointed as the stock returned -11.3% 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.