We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (10 coronavirus predictions).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the fourth quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4 years and analyze what the smart money thinks of AGNC Investment Corp. (NASDAQ:AGNC) based on that data.
AGNC Investment Corp. (NASDAQ:AGNC) was in 21 hedge funds’ portfolios at the end of December. AGNC investors should pay attention to an increase in support from the world’s most elite money managers lately. There were 18 hedge funds in our database with AGNC holdings at the end of the previous quarter. Our calculations also showed that AGNC isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
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.
George Soros of Soros Fund 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. Keeping this in mind we’re going to take a look at the key hedge fund action encompassing AGNC Investment Corp. (NASDAQ:AGNC).
How have hedgies been trading AGNC Investment Corp. (NASDAQ:AGNC)?
Heading into the first quarter of 2020, a total of 21 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 17% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards AGNC over the last 18 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Renaissance Technologies was the largest shareholder of AGNC Investment Corp. (NASDAQ:AGNC), with a stake worth $58.5 million reported as of the end of September. Trailing Renaissance Technologies was Clough Capital Partners, which amassed a stake valued at $26.6 million. Soros Fund Management, Winton Capital Management, and Citadel Investment Group 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 Clough Capital Partners allocated the biggest weight to AGNC Investment Corp. (NASDAQ:AGNC), around 2.27% of its 13F portfolio. Callodine Capital Management is also relatively very bullish on the stock, dishing out 1.4 percent of its 13F equity portfolio to AGNC.
As industrywide interest jumped, key money managers have been driving this bullishness. Renaissance Technologies, created the largest position in AGNC Investment Corp. (NASDAQ:AGNC). Renaissance Technologies had $58.5 million invested in the company at the end of the quarter. Charles Clough’s Clough Capital Partners also initiated a $26.6 million position during the quarter. The other funds with new positions in the stock are Joseph Samuels’s Islet Management, D. E. Shaw’s D E Shaw, and Paul Tudor Jones’s Tudor Investment Corp.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as AGNC Investment Corp. (NASDAQ:AGNC) but similarly valued. We will take a look at Zillow Group Inc (NASDAQ:Z), Targa Resources Corp (NYSE:TRGP), Teck Resources Ltd (NYSE:TECK), and Vipshop Holdings Limited (NYSE:VIPS). This group of stocks’ market valuations are closest to AGNC’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| Z | 37 | 1682527 | -5 |
| TRGP | 27 | 346879 | 9 |
| TECK | 30 | 687927 | 10 |
| VIPS | 27 | 403120 | 3 |
| Average | 30.25 | 780113 | 4.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 30.25 hedge funds with bullish positions and the average amount invested in these stocks was $780 million. That figure was $147 million in AGNC’s case. Zillow Group Inc (NASDAQ:Z) is the most popular stock in this table. On the other hand Targa Resources Corp (NYSE:TRGP) is the least popular one with only 27 bullish hedge fund positions. Compared to these stocks AGNC Investment Corp. (NASDAQ:AGNC) is even less popular than TRGP. Hedge funds dodged a bullet by taking a bearish stance towards AGNC. Our calculations showed that the top 20 most popular hedge fund stocks 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 managed to beat the market by 3.2 percentage points. Unfortunately AGNC wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); AGNC investors were disappointed as the stock returned -32% 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 most of these stocks already outperformed the market so far in Q1.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
