Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published this article and predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits.
Is American Express Company (NYSE:AXP) a bargain? Investors who are in the know are buying. The number of bullish hedge fund positions moved up by 3 recently. Our calculations also showed that AXP isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 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 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 72.9% since March 2017 and outperformed the S&P 500 ETFs by more than 41 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.
John Armitage of Egerton Capital
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. In January, we recommended a long position in one of the most shorted stocks in the market, and that stock returned more than 50% despite the large losses in the market since our recommendation. With all of this in mind let’s check out the new hedge fund action encompassing American Express Company (NYSE:AXP).
How are hedge funds trading American Express Company (NYSE:AXP)?
At Q4’s end, a total of 58 of the hedge funds tracked by Insider Monkey were long this stock, a change of 5% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards AXP over the last 18 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in American Express Company (NYSE:AXP) was held by Berkshire Hathaway, which reported holding $18874 million worth of stock at the end of September. It was followed by Fisher Asset Management with a $1713.1 million position. Other investors bullish on the company included Egerton Capital Limited, GAMCO Investors, and D E Shaw. In terms of the portfolio weights assigned to each position Aquamarine Capital Management allocated the biggest weight to American Express Company (NYSE:AXP), around 12.74% of its 13F portfolio. Hi-Line Capital Management is also relatively very bullish on the stock, dishing out 8.67 percent of its 13F equity portfolio to AXP.
As industrywide interest jumped, key hedge funds have been driving this bullishness. Ako Capital, managed by Nicolai Tangen, assembled the most outsized position in American Express Company (NYSE:AXP). Ako Capital had $157.7 million invested in the company at the end of the quarter. Ravi Chopra’s Azora Capital also initiated a $46.6 million position during the quarter. The other funds with brand new AXP positions are Robert Pohly’s Samlyn Capital, Brandon Haley’s Holocene Advisors, and Donald Sussman’s Paloma Partners.
Let’s also examine hedge fund activity in other stocks similar to American Express Company (NYSE:AXP). We will take a look at American Tower Corporation (REIT) (NYSE:AMT), 3M Company (NYSE:MMM), QUALCOMM, Incorporated (NASDAQ:QCOM), and United Parcel Service, Inc. (NYSE:UPS). This group of stocks’ market valuations are similar to AXP’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AMT | 46 | 3658378 | -6 |
| MMM | 46 | 855763 | -6 |
| QCOM | 67 | 3090818 | 7 |
| UPS | 42 | 975024 | -3 |
| Average | 50.25 | 2144996 | -2 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 50.25 hedge funds with bullish positions and the average amount invested in these stocks was $2145 million. That figure was $22554 million in AXP’s case. QUALCOMM, Incorporated (NASDAQ:QCOM) is the most popular stock in this table. On the other hand United Parcel Service, Inc. (NYSE:UPS) is the least popular one with only 42 bullish hedge fund positions. American Express Company (NYSE:AXP) is not the most popular stock in this group but hedge fund interest is still above average. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 12.9% in 2020 through March 9th but beat the market by 1.9 percentage points. Unfortunately AXP wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on AXP were disappointed as the stock returned -20.8% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.
