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 Ameren Corporation (NYSE:AEE).
Ameren Corporation (NYSE:AEE) investors should pay attention to an increase in support from the world’s most elite money managers lately. Our calculations also showed that AEE 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In the eyes of most shareholders, hedge funds are assumed to be unimportant, outdated financial vehicles of yesteryear. While there are greater than 8000 funds trading today, Our experts hone in on the elite of this club, approximately 750 funds. These investment experts control bulk of the smart money’s total asset base, and by watching their matchless equity investments, Insider Monkey has revealed a few investment strategies that have historically outpaced the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points annually since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
Jonathan Barrett of Luminus Management
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. We’re going to take a gander at the latest hedge fund action encompassing Ameren Corporation (NYSE:AEE).
How have hedgies been trading Ameren Corporation (NYSE:AEE)?
At Q3’s end, a total of 30 of the hedge funds tracked by Insider Monkey were long this stock, a change of 67% from the second quarter of 2019. On the other hand, there were a total of 21 hedge funds with a bullish position in AEE a year ago. With hedgies’ capital changing hands, there exists a select group of notable hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in Ameren Corporation (NYSE:AEE), which was worth $448.7 million at the end of the third quarter. On the second spot was Citadel Investment Group which amassed $279.9 million worth of shares. Millennium Management, AQR Capital Management, and Carlson Capital 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 Ameren Corporation (NYSE:AEE), around 8.09% of its portfolio. Blackstart Capital is also relatively very bullish on the stock, setting aside 3.41 percent of its 13F equity portfolio to AEE.
As aggregate interest increased, specific money managers were leading the bulls’ herd. Carlson Capital, managed by Clint Carlson, established the most valuable position in Ameren Corporation (NYSE:AEE). Carlson Capital had $55.1 million invested in the company at the end of the quarter. Jonathan Barrett and Paul Segal’s Luminus Management also initiated a $35 million position during the quarter. The other funds with new positions in the stock are Sara Nainzadeh’s Centenus Global Management, Dmitry Balyasny’s Balyasny Asset Management, and Peter J. Hark’s Shelter Harbor Advisors.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Ameren Corporation (NYSE:AEE) but similarly valued. We will take a look at TAL Education Group (NYSE:TAL), Match Group, Inc. (NASDAQ:MTCH), Northern Trust Corporation (NASDAQ:NTRS), and Boston Properties, Inc. (NYSE:BXP). This group of stocks’ market values are similar to AEE’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TAL | 20 | 1504129 | -5 |
| MTCH | 41 | 1106508 | 10 |
| NTRS | 21 | 316167 | -8 |
| BXP | 24 | 447838 | 1 |
| Average | 26.5 | 843661 | -0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 26.5 hedge funds with bullish positions and the average amount invested in these stocks was $844 million. That figure was $1557 million in AEE’s case. Match Group, Inc. (NASDAQ:MTCH) is the most popular stock in this table. On the other hand TAL Education Group (NYSE:TAL) is the least popular one with only 20 bullish hedge fund positions. Ameren Corporation (NYSE:AEE) 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately AEE wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on AEE were disappointed as the stock returned -7.1% during the fourth quarter (through the end of November) 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.
