Does American Electric Power Company, Inc. (NYSE:AEP) represent a good buying opportunity at the moment? Let’s briefly check the hedge fund interest towards the company. Hedge fund firms constantly search out bright intellectuals and highly-experienced employees and throw away millions of dollars on research activities, so it is no wonder why they tend to generate millions in profits each year. It is also true that some hedge fund players fail inconceivably on some occasions, but their stock picks have been generating superior risk-adjusted returns on average over the years.
American Electric Power Company, Inc. (NYSE:AEP) was in 36 hedge funds’ portfolios at the end of September. AEP shareholders have witnessed an increase in support from the world’s most elite money managers in recent months. There were 26 hedge funds in our database with AEP holdings at the end of the previous quarter. Our calculations also showed that AEP isn’t among the 30 most popular stocks among hedge funds.
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 the 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 market by 18 percentage points since May 2014 through December 3, 2018 (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.
Let’s take a glance at the recent hedge fund action encompassing American Electric Power Company, Inc. (NYSE:AEP).
What does the smart money think about American Electric Power Company, Inc. (NYSE:AEP)?
At Q3’s end, a total of 36 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 38% from the second quarter of 2018. Below, you can check out the change in hedge fund sentiment towards AEP over the last 13 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Jim Simons’s Renaissance Technologies has the most valuable position in American Electric Power Company, Inc. (NYSE:AEP), worth close to $399.9 million, amounting to 0.4% of its total 13F portfolio. The second largest stake is held by Citadel Investment Group, led by Ken Griffin, holding a $302.4 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Remaining professional money managers with similar optimism consist of Cliff Asness’s AQR Capital Management, Clint Carlson’s Carlson Capital and Dmitry Balyasny’s Balyasny Asset Management.
With a general bullishness amongst the heavyweights, specific money managers have jumped into American Electric Power Company, Inc. (NYSE:AEP) headfirst. Covalis Capital, managed by ZilvinasáMecelis, created the most outsized position in American Electric Power Company, Inc. (NYSE:AEP). Covalis Capital had $17.2 million invested in the company at the end of the quarter. Jeffrey Talpins’s Element Capital Management also initiated a $3.7 million position during the quarter. The other funds with new positions in the stock are Paul Tudor Jones’s Tudor Investment Corp, Ian Simm’s Impax Asset Management, and Mike Vranos’s Ellington.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as American Electric Power Company, Inc. (NYSE:AEP) but similarly valued. These stocks are ServiceNow Inc (NYSE:NOW), The Travelers Companies, Inc. (NYSE:TRV), Anadarko Petroleum Corporation (NYSE:APC), and Equinix, Inc. (REIT)(NASDAQ:EQIX). All of these stocks’ market caps are closest to AEP’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NOW | 65 | 3610372 | 19 |
| TRV | 26 | 1195022 | -2 |
| APC | 45 | 2097229 | -3 |
| EQIX | 41 | 2263056 | 4 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 44.25 hedge funds with bullish positions and the average amount invested in these stocks was $2.3 billion. That figure was $1.26 billion in AEP’s case. ServiceNow Inc (NYSE:NOW) is the most popular stock in this table. On the other hand The Travelers Companies, Inc. (NYSE:TRV) is the least popular one with only 26 bullish hedge fund positions. American Electric Power Company, Inc. (NYSE:AEP) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard NOW might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
