Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Ameriprise Financial, Inc. (NYSE:AMP).
Ameriprise Financial, Inc. (NYSE:AMP) was in 39 hedge funds’ portfolios at the end of June. AMP shareholders have witnessed an increase in activity from the world’s largest hedge funds lately. There were 34 hedge funds in our database with AMP holdings at the end of the previous quarter. Our calculations also showed that AMP isn’t among the 30 most popular stocks among hedge funds (see the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to take a gander at the latest hedge fund action encompassing Ameriprise Financial, Inc. (NYSE:AMP).
What have hedge funds been doing with Ameriprise Financial, Inc. (NYSE:AMP)?
Heading into the third quarter of 2019, a total of 39 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 15% from the previous quarter. By comparison, 30 hedge funds held shares or bullish call options in AMP a year ago. With the smart money’s sentiment swirling, there exists a few notable hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).
Sander Gerber of Hudson Bay Capital
The largest stake in Ameriprise Financial, Inc. (NYSE:AMP) was held by GLG Partners, which reported holding $302.6 million worth of stock at the end of March. It was followed by AQR Capital Management with a $161 million position. Other investors bullish on the company included Citadel Investment Group, Arrowstreet Capital, and Moore Global Investments.
As industrywide interest jumped, specific money managers have jumped into Ameriprise Financial, Inc. (NYSE:AMP) headfirst. Azora Capital, managed by Ravi Chopra, assembled the most outsized position in Ameriprise Financial, Inc. (NYSE:AMP). Azora Capital had $29.3 million invested in the company at the end of the quarter. Sander Gerber’s Hudson Bay Capital Management also initiated a $4 million position during the quarter. The other funds with brand new AMP positions are Steve Cohen’s Point72 Asset Management, Lee Ainslie’s Maverick Capital, and Matthew Hulsizer’s PEAK6 Capital Management.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Ameriprise Financial, Inc. (NYSE:AMP) but similarly valued. These stocks are ORIX Corporation (NYSE:IX), KLA Corporation (NASDAQ:KLAC), Splunk Inc (NASDAQ:SPLK), and Rockwell Automation Inc. (NYSE:ROK). This group of stocks’ market valuations resemble AMP’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| IX | 6 | 12820 | 0 |
| KLAC | 24 | 504403 | -17 |
| SPLK | 25 | 206778 | -4 |
| ROK | 31 | 423135 | 3 |
| Average | 21.5 | 286784 | -4.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.5 hedge funds with bullish positions and the average amount invested in these stocks was $287 million. That figure was $961 million in AMP’s case. Rockwell Automation Inc. (NYSE:ROK) is the most popular stock in this table. On the other hand ORIX Corporation (NYSE:IX) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Ameriprise Financial, Inc. (NYSE:AMP) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Hedge funds were also right about betting on AMP, though not to the same extent, as the stock returned 2% during the third quarter and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
