Should You Avoid Atlantic Power Corp (AT)?

Legendary investors such as Leon Cooperman and Seth Klarman earn enormous amounts of money for themselves and their investors by doing in-depth research on small-cap stocks that big brokerage houses don’t publish. Small cap stocks -especially when they are screened well- can generate substantial outperformance versus a boring index fund. That’s why we analyze the activity of those elite funds in these small-cap stocks. In the following paragraphs, we analyze Atlantic Power Corp (NYSE:AT) from the perspective of those elite funds.

Atlantic Power Corp shareholders have had a disappointing year so far, with the stock 30% in the red year-to-date. Moreover, the stock has witnessed a decrease in activity from the world’s largest hedge funds in recent months. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity, but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as KMG Chemicals, Inc. (NYSE:KMG), Nutraceutical Int’l Corp. (NASDAQ:NUTR), and Fidus Investment Corp (NASDAQ:FDUS) to gather more data points.

To most investors, hedge funds are viewed as underperforming, outdated financial vehicles of the past. While there are more than 8000 funds with their doors open at the moment, Our researchers choose to focus on the top tier of this club, around 700 funds. These investment experts direct most of all hedge funds’ total asset base, and by keeping track of their matchless equity investments, Insider Monkey has figured out many investment strategies that have historically beaten the broader indices. Insider Monkey’s small-cap hedge fund strategy exceeded the S&P 500 index by 12 percentage points annually for a decade in their back tests.

With all of this in mind, let’s go over the fresh action regarding Atlantic Power Corp (NYSE:AT).

What does the smart money think about Atlantic Power Corp (NYSE:AT)?

At the Q3’s end, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, a drop of 8% from the previous quarter. With the smart money’s capital changing hands, there exists a few notable hedge fund managers who were upping their holdings significantly (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, 12 West Capital Management, managed by Joel Ramin, holds the number one position in Atlantic Power Corp (NYSE:AT). 12 West Capital Management has a $13.6 million position in the stock, comprising 2% of its 13F portfolio. The second most bullish fund manager is Nathaniel August’s Mangrove Partners, with a $11.5 million position; the fund has 2.6% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors that hold long positions include David M. Markowitz’s Oskie Capital Management, D. E. Shaw’s D E Shaw and George Hall’s Clinton Group.

Because Atlantic Power Corp (NYSE:AT) has experienced falling interest from the entirety of the hedge funds we track, logic holds that there was a specific group of hedgies that elected to cut their entire stakes last quarter. Interestingly, Michael Reeber’s Andalusian Capital Partners cut the biggest investment of the 700 funds followed by Insider Monkey, totaling about $3.9 million in stock. Andy Redleaf’s fund, Whitebox Advisors, also dumped its stock, about $1.4 million worth. These transactions are important to note, as total hedge fund interest fell by 1 funds last quarter.

Let’s also examine hedge fund activity in other stocks similar to Atlantic Power Corp (NYSE:AT). These stocks are KMG Chemicals, Inc. (NYSE:KMG), Nutraceutical Int’l Corp. (NASDAQ:NUTR), Fidus Investment Corp (NASDAQ:FDUS), and FuelCell Energy, Inc. (NASDAQ:FCEL). This group of stocks’ market valuations are similar to AT’s market valuation.

As you can see these stocks had an average of 6 hedge funds with bullish positions and the average amount invested in these stocks was $18 million. That figure was $32 million in AT’s case. KMG Chemicals, Inc. (NYSE:KMG) is the most popular stock in this table. On the other hand Nutraceutical Int’l Corp. (NASDAQ:NUTR) and Fidus Investment Corp (NASDAQ:FDUS) are the least popular ones with only 4 bullish hedge fund positions. Compared to these stocks Atlantic Power Corp (NYSE:AT) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.