Is AGNC Stock A Buy or Sell?

While the market driven by short-term sentiment influenced by the accommodative interest rate environment in the US, virus news and stimulus spending, many smart money investors are starting to get cautious towards the current bull run since March and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding AGNC Investment Corp. (NASDAQ:AGNC).

Is AGNC stock a buy? Prominent investors were in a bearish mood. The number of long hedge fund bets decreased by 7 recently. AGNC Investment Corp. (NASDAQ:AGNC) was in 25 hedge funds’ portfolios at the end of December. The all time high for this statistic is 37. Our calculations also showed that AGNC isn’t among the 30 most popular stocks among hedge funds (click for Q4 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 197% since March 2017 and outperformed the S&P 500 ETFs by more than 124 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.

Charles Clough of Clough Capital Partners

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, auto parts business is a recession resistant business, so we are taking a closer look at this discount auto parts stock that is growing at a 196% annualized rate. We go through lists like the 15 best micro-cap stocks to buy now to identify the next stock with 10x upside potential. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind we’re going to go over the fresh hedge fund action encompassing AGNC Investment Corp. (NASDAQ:AGNC).

Do Hedge Funds Think AGNC Is A Good Stock To Buy Now?

At Q4’s end, a total of 25 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -22% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards AGNC over the last 22 quarters. With hedge funds’ capital changing hands, there exists a few noteworthy hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).

More specifically, D E Shaw was the largest shareholder of AGNC Investment Corp. (NASDAQ:AGNC), with a stake worth $91.3 million reported as of the end of December. Trailing D E Shaw was Canyon Capital Advisors, which amassed a stake valued at $58.5 million. OZ Management, Clough Capital Partners, and Arrowstreet 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 Canyon Capital Advisors allocated the biggest weight to AGNC Investment Corp. (NASDAQ:AGNC), around 2.52% of its 13F portfolio. Clough Capital Partners is also relatively very bullish on the stock, setting aside 2.18 percent of its 13F equity portfolio to AGNC.

Since AGNC Investment Corp. (NASDAQ:AGNC) has faced a decline in interest from the entirety of the hedge funds we track, logic holds that there were a few fund managers who were dropping their entire stakes by the end of the fourth quarter. At the top of the heap, Louis Bacon’s Moore Global Investments said goodbye to the largest position of the 750 funds tracked by Insider Monkey, totaling an estimated $36.1 million in stock. David MacKnight’s fund, One Fin Capital Management, also said goodbye to its stock, about $7.7 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest dropped by 7 funds by the end of the fourth quarter.

Let’s now review 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 Hubbell Incorporated (NYSE:HUBB), ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD), Chemed Corporation (NYSE:CHE), Natera Inc (NASDAQ:NTRA), Iron Mountain Incorporated (NYSE:IRM), Service Corporation International (NYSE:SCI), and Smartsheet Inc. (NYSE:SMAR). All of these stocks’ market caps match AGNC’s market cap.

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As you can see these stocks had an average of 32.6 hedge funds with bullish positions and the average amount invested in these stocks was $1102 million. That figure was $353 million in AGNC’s case. Natera Inc (NASDAQ:NTRA) is the most popular stock in this table. On the other hand Iron Mountain Incorporated (NYSE:IRM) is the least popular one with only 18 bullish hedge fund positions. AGNC Investment Corp. (NASDAQ:AGNC) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for AGNC is 30.8. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.3% in 2021 through April 19th and still beat the market by 0.9 percentage points. A small number of hedge funds were also right about betting on AGNC as the stock returned 13.6% since the end of the fourth quarter (through 4/19) and outperformed the market by an even larger margin.

Disclosure: None. This article was originally published at Insider Monkey.