Hedge funds are known to underperform the bull markets but that’s not because they are bad at investing. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. Hedge funds underperform because they are hedged. The Standard and Poor’s 500 Total Return Index ETFs returned 27.5% through the end of November. Conversely, hedge funds’ top 20 large-cap stock picks generated a return of 37.4% during the same period. An average long/short hedge fund returned only a fraction of this due to the hedges they implement and the large fees they charge. Our research covering the last 18 years indicates that investors can outperform the market by imitating hedge funds’ consensus stock picks rather than directly investing in hedge funds. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Ameriprise Financial, Inc. (NYSE:AMP). There are two ETFs with nearly 5% weights in AMP: WBI BullBear Quality 1000 ETF (NYSE:WBIL) and Deep Value ETF (NYSE:DVP).
Ameriprise Financial, Inc. (NYSE:AMP) has experienced a decrease in hedge fund sentiment lately. AMP was in 27 hedge funds’ portfolios at the end of the third quarter of 2019. There were 39 hedge funds in our database with AMP positions at the end of the previous quarter. Our calculations also showed that AMP isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a multitude of formulas market participants use to analyze stocks. A couple of the most under-the-radar formulas are hedge fund and insider trading activity. Our researchers have shown that, historically, those who follow the top picks of the elite fund managers can beat the S&P 500 by a solid amount (see the details here).
Jeffrey Talpins of Element Capital
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. Let’s check out the key hedge fund action regarding Ameriprise Financial, Inc. (NYSE:AMP).
How have hedgies been trading Ameriprise Financial, Inc. (NYSE:AMP)?
At the end of the third quarter, a total of 27 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -31% from the previous quarter. By comparison, 33 hedge funds held shares or bullish call options in AMP a year ago. With the smart money’s sentiment swirling, there exists a select group of key hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
The largest stake in Ameriprise Financial, Inc. (NYSE:AMP) was held by Lyrical Asset Management, which reported holding $328 million worth of stock at the end of September. It was followed by GLG Partners with a $260.7 million position. Other investors bullish on the company included AQR Capital Management, Arrowstreet Capital, and Moore Global Investments. In terms of the portfolio weights assigned to each position Lyrical Asset Management allocated the biggest weight to Ameriprise Financial, Inc. (NYSE:AMP), around 4.94% of its portfolio. Moore Global Investments is also relatively very bullish on the stock, dishing out 1.61 percent of its 13F equity portfolio to AMP.
Judging by the fact that Ameriprise Financial, Inc. (NYSE:AMP) has experienced declining sentiment from the smart money, we can see that there exists a select few money managers who were dropping their positions entirely by the end of the third quarter. At the top of the heap, Ken Griffin’s Citadel Investment Group dropped the largest position of the “upper crust” of funds tracked by Insider Monkey, totaling an estimated $155.4 million in stock. Ravi Chopra’s fund, Azora Capital, also sold off its stock, about $29.3 million worth. These bearish behaviors are interesting, as total hedge fund interest was cut by 12 funds by the end of the third quarter.
Let’s now take a look at hedge fund activity in other stocks similar to Ameriprise Financial, Inc. (NYSE:AMP). We will take a look at The Clorox Company (NYSE:CLX), Cincinnati Financial Corporation (NASDAQ:CINF), CGI Inc. (NYSE:GIB), and Liberty Broadband Corp (NASDAQ:LBRDK). This group of stocks’ market caps match AMP’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CLX | 32 | 1004826 | 4 |
| CINF | 23 | 565077 | 5 |
| GIB | 14 | 300448 | 0 |
| LBRDK | 40 | 3494094 | 0 |
| Average | 27.25 | 1341111 | 2.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 27.25 hedge funds with bullish positions and the average amount invested in these stocks was $1341 million. That figure was $1105 million in AMP’s case. Liberty Broadband Corp (NASDAQ:LBRDK) is the most popular stock in this table. On the other hand CGI Inc. (NYSE:GIB) is the least popular one with only 14 bullish hedge fund positions. Ameriprise Financial, Inc. (NYSE:AMP) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on AMP as the stock returned 12.1% during the first two months of Q4 and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
