Investing in hedge funds can bring large profits, but it’s not for everybody, since hedge funds are available only for high-net-worth individuals. They generate significant returns for investors to justify their large fees and they allocate a lot of time and employ a complex analysis to determine the best stocks to invest in. A particularly interesting group of stocks that hedge funds like is the small-caps. The huge amount of capital does not allow hedge funds to invest a lot in small-caps, but our research showed that their most popular small-cap ideas are less efficiently priced and generate stronger returns than their large- and mega-cap picks and the broader market. That is why we pay special attention to the hedge fund activity in the small-cap space.
Ameriprise Financial, Inc. (NYSE:AMP) shareholders have witnessed an increase in hedge fund interest in recent months. Our calculations also showed that amp isn’t among the 30 most popular stocks among hedge funds.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Noam Gottesman, GLG Partners
Let’s take a look at the fresh hedge fund action regarding Ameriprise Financial, Inc. (NYSE:AMP).
How have hedgies been trading Ameriprise Financial, Inc. (NYSE:AMP)?
At Q1’s end, a total of 34 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 6% from the previous quarter. The graph below displays the number of hedge funds with bullish position in AMP over the last 15 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).
More specifically, Citadel Investment Group was the largest shareholder of Ameriprise Financial, Inc. (NYSE:AMP), with a stake worth $173.1 million reported as of the end of March. Trailing Citadel Investment Group was GLG Partners, which amassed a stake valued at $146.5 million. AQR Capital Management, Arrowstreet Capital, and Millennium Management were also very fond of the stock, giving the stock large weights in their portfolios.
As one would reasonably expect, specific money managers have been driving this bullishness. Moore Global Investments, managed by Louis Bacon, assembled the biggest position in Ameriprise Financial, Inc. (NYSE:AMP). Moore Global Investments had $41.6 million invested in the company at the end of the quarter. Daniel Johnson’s Gillson Capital also made a $14.9 million investment in the stock during the quarter. The following funds were also among the new AMP investors: Matthew Hulsizer’s PEAK6 Capital Management, Matthew Tewksbury’s Stevens Capital Management, and Joe DiMenna’s ZWEIG DIMENNA PARTNERS.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Ameriprise Financial, Inc. (NYSE:AMP) but similarly valued. We will take a look at DXC Technology Company (NYSE:DXC), Synopsys, Inc. (NASDAQ:SNPS), NetApp Inc. (NASDAQ:NTAP), and Teva Pharmaceutical Industries Limited (NYSE:TEVA). This group of stocks’ market valuations are closest to AMP’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| DXC | 46 | 2102765 | 3 |
| SNPS | 31 | 1562669 | -3 |
| NTAP | 24 | 973282 | 3 |
| TEVA | 32 | 1713411 | -3 |
| Average | 33.25 | 1588032 | 0 |
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 $1588 million. That figure was $862 million in AMP’s case. DXC Technology Company (NYSE:DXC) is the most popular stock in this table. On the other hand NetApp Inc. (NASDAQ:NTAP) is the least popular one with only 24 bullish hedge fund positions. Ameriprise Financial, Inc. (NYSE:AMP) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Hedge funds were also right about betting on AMP as the stock returned 12.6% during the same period and outperformed the market by an even larger margin. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.
