Was The Smart Money Right About Vistra Corp. (VST)?

Reymerlyn Martin

Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren't timid and registered double digit market beating gains. Financials, energy and industrial stocks aren't doing great but many of the stocks that delivered strong returns since March are still going very strong and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment to Vistra Corp. (NYSE:VST) changed recently.

Is Vistra Corp. (NYSE:VST) an exceptional investment right now? Money managers were taking a bullish view. The number of bullish hedge fund bets improved by 3 in recent months. Vistra Corp. (NYSE:VST) was in 42 hedge funds' portfolios at the end of June. The all time high for this statistics is 49. Our calculations also showed that VST isn't among the 30 most popular stocks among hedge funds (click for Q2 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.

In today’s marketplace there are plenty of gauges shareholders use to appraise publicly traded companies. A couple of the less known gauges are hedge fund and insider trading indicators. Our experts have shown that, historically, those who follow the best picks of the elite money managers can beat the market by a healthy margin (see the details here).

Howard Marks OAKTREE CAPITAL MANAGEMENT
Howard Marks OAKTREE CAPITAL MANAGEMENT

Howard Marks of Oaktree Capital Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than quadrupled this year. We are trying to identify other EV revolution winners, so we are checking out this under-the-radar lithium stock. We go through lists like the 10 best artificial intelligence stocks to pick the best growth stocks to buy. 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 to get excerpts of these letters in your inbox. Now we're going to take a peek at the key hedge fund action regarding Vistra Corp. (NYSE:VST).

Hedge fund activity in Vistra Corp. (NYSE:VST)

At second quarter's end, a total of 42 of the hedge funds tracked by Insider Monkey were long this stock, a change of 8% from the previous quarter. The graph below displays the number of hedge funds with bullish position in VST over the last 20 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, Oaktree Capital Management was the largest shareholder of Vistra Corp. (NYSE:VST), with a stake worth $563.8 million reported as of the end of September. Trailing Oaktree Capital Management was GoldenTree Asset Management, which amassed a stake valued at $147.2 million. Avenue Capital, Angelo Gordon & Co, and Renaissance Technologies 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 Avenue Capital allocated the biggest weight to Vistra Corp. (NYSE:VST), around 78.82% of its 13F portfolio. GoldenTree Asset Management is also relatively very bullish on the stock, designating 18.04 percent of its 13F equity portfolio to VST.

Now, key money managers have jumped into Vistra Corp. (NYSE:VST) headfirst. Adage Capital Management, managed by Phill Gross and Robert Atchinson, created the most outsized position in Vistra Corp. (NYSE:VST). Adage Capital Management had $14 million invested in the company at the end of the quarter. Brian Olson, Baehyun Sung, and Jamie Waters's Blackstart Capital also initiated a $6.4 million position during the quarter. The other funds with new positions in the stock are Christian Leone's Luxor Capital Group, Donald Sussman's Paloma Partners, and Anand Parekh's Alyeska Investment Group.

Let's check out hedge fund activity in other stocks similar to Vistra Corp. (NYSE:VST). We will take a look at MGM Growth Properties LLC (NYSE:MGP), Kinross Gold Corporation (NYSE:KGC), PTC Inc (NASDAQ:PTC), Dropbox, Inc. (NASDAQ:DBX), Autohome Inc (NYSE:ATHM), Banco de Chile (NYSE:BCH), and Lennox International Inc. (NYSE:LII). This group of stocks' market caps resemble VST's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MGP,32,569697,4 KGC,30,806038,2 PTC,40,1255947,5 DBX,51,1326475,7 ATHM,24,820669,9 BCH,3,38541,-1 LII,24,258111,3 Average,29.1,725068,4.1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 29.1 hedge funds with bullish positions and the average amount invested in these stocks was $725 million. That figure was $1562 million in VST's case. Dropbox, Inc. (NASDAQ:DBX) is the most popular stock in this table. On the other hand Banco de Chile (NYSE:BCH) is the least popular one with only 3 bullish hedge fund positions. Vistra Corp. (NYSE:VST) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for VST is 74.3. 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. 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 30% in 2020 through October 23rd and beat the market by 21 percentage points. Unfortunately VST wasn't nearly as popular as these 10 stocks and hedge funds that were betting on VST were disappointed as the stock returned 4.3% since the end of June (through 10/23) 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.

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