Will the new coronavirus cause a recession in US in the next 6 months? On February 27th, we put the probability at 75% and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Atmos Energy Corporation (NYSE:ATO).
Atmos Energy Corporation (NYSE:ATO) investors should be aware of an increase in support from the world’s most elite money managers recently. ATO was in 26 hedge funds’ portfolios at the end of December. There were 23 hedge funds in our database with ATO positions at the end of the previous quarter. Our calculations also showed that ATO 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 21st century investor’s toolkit there are many formulas stock market investors can use to value their stock investments. A pair of the less known formulas are hedge fund and insider trading signals. Our experts have shown that, historically, those who follow the best picks of the best money managers can outperform the broader indices by a significant margin (see the details here).
Cliff Asness of AQR Capital Management
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to take a look at the new hedge fund action encompassing Atmos Energy Corporation (NYSE:ATO).
How are hedge funds trading Atmos Energy Corporation (NYSE:ATO)?
At Q4’s end, a total of 26 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 13% from the previous quarter. By comparison, 25 hedge funds held shares or bullish call options in ATO a year ago. With hedge funds’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).
More specifically, AQR Capital Management was the largest shareholder of Atmos Energy Corporation (NYSE:ATO), with a stake worth $98.9 million reported as of the end of September. Trailing AQR Capital Management was Adage Capital Management, which amassed a stake valued at $46.1 million. Citadel Investment Group, Luminus Management, and Winton Capital Management 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 Shelter Harbor Advisors allocated the biggest weight to Atmos Energy Corporation (NYSE:ATO), around 3.79% of its 13F portfolio. Blackstart Capital is also relatively very bullish on the stock, setting aside 3.29 percent of its 13F equity portfolio to ATO.
As industrywide interest jumped, key money managers have been driving this bullishness. Blackstart Capital, managed by Brian Olson, Baehyun Sung, and Jamie Waters, initiated the biggest position in Atmos Energy Corporation (NYSE:ATO). Blackstart Capital had $7.5 million invested in the company at the end of the quarter. Peter J. Hark’s Shelter Harbor Advisors also initiated a $7.3 million position during the quarter. The other funds with brand new ATO positions are D. E. Shaw’s D E Shaw, Matthew Hulsizer’s PEAK6 Capital Management, and Jinghua Yan’s TwinBeech Capital.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Atmos Energy Corporation (NYSE:ATO) but similarly valued. These stocks are Arconic Inc. (NYSE:ARNC), Host Hotels and Resorts Inc (NYSE:HST), Wheaton Precious Metals Corp. (NYSE:WPM), and DocuSign, Inc. (NASDAQ:DOCU). This group of stocks’ market values resemble ATO’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ARNC | 43 | 3678178 | 8 |
| HST | 27 | 409585 | -3 |
| WPM | 30 | 476804 | 1 |
| DOCU | 33 | 905820 | 5 |
| Average | 33.25 | 1367597 | 2.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 33.25 hedge funds with bullish positions and the average amount invested in these stocks was $1368 million. That figure was $315 million in ATO’s case. Arconic Inc. (NYSE:ARNC) is the most popular stock in this table. On the other hand Host Hotels and Resorts Inc (NYSE:HST) is the least popular one with only 27 bullish hedge fund positions. Compared to these stocks Atmos Energy Corporation (NYSE:ATO) is even less popular than HST. Hedge funds clearly dropped the ball on ATO as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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 22.3% in 2020 through March 16th but still beat the market by 3.2 percentage points. A small number of hedge funds were also right about betting on ATO as the stock returned -15.8% during the same time period and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
