In this article you are going to find out whether hedge funds think American Express Company (NYSE:AXP) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Is American Express Company (NYSE:AXP) an outstanding investment today? Money managers were becoming less hopeful. The number of long hedge fund positions went down by 1 in recent months. American Express Company (NYSE:AXP) was in 52 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 60. Our calculations also showed that AXP isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 53 hedge funds in our database with AXP positions at the end of the first quarter.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 79 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Mario Gabelli of GAMCO Investors
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, billionaire John Paulson is loading up on the miners, so we are checking out stock pitches like this mining stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Keeping this in mind let’s check out the key hedge fund action encompassing American Express Company (NYSE:AXP).
Do Hedge Funds Think AXP Is A Good Stock To Buy Now?
At second quarter’s end, a total of 52 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -2% from the previous quarter. By comparison, 54 hedge funds held shares or bullish call options in AXP a year ago. With the smart money’s sentiment swirling, there exists a select group of key hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
More specifically, Berkshire Hathaway was the largest shareholder of American Express Company (NYSE:AXP), with a stake worth $25050.6 million reported as of the end of June. Trailing Berkshire Hathaway was Fisher Asset Management, which amassed a stake valued at $2539.6 million. Citadel Investment Group, GAMCO Investors, 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 Aquamarine Capital Management allocated the biggest weight to American Express Company (NYSE:AXP), around 16.28% of its 13F portfolio. Berkshire Hathaway is also relatively very bullish on the stock, dishing out 8.55 percent of its 13F equity portfolio to AXP.
Seeing as American Express Company (NYSE:AXP) has witnessed falling interest from hedge fund managers, we can see that there exists a select few fund managers that decided to sell off their entire stakes by the end of the second quarter. Intriguingly, Dmitry Balyasny’s Balyasny Asset Management cut the largest investment of the “upper crust” of funds watched by Insider Monkey, valued at about $56 million in stock. Daniel Johnson’s fund, Gillson Capital, also dropped its stock, about $27.9 million worth. These transactions are important to note, as aggregate hedge fund interest dropped by 1 funds by the end of the second quarter.
Let’s also examine hedge fund activity in other stocks similar to American Express Company (NYSE:AXP). These stocks are Starbucks Corporation (NASDAQ:SBUX), Sanofi (NYSE:SNY), International Business Machines Corp. (NYSE:IBM), Applied Materials, Inc. (NASDAQ:AMAT), Raytheon Technologies Corp (NYSE:RTX), Goldman Sachs Group, Inc. (NYSE:GS), and Toronto-Dominion Bank (NYSE:TD). This group of stocks’ market caps resemble AXP’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SBUX | 63 | 4757968 | 2 |
| SNY | 16 | 1261299 | 1 |
| IBM | 41 | 1373521 | 0 |
| AMAT | 73 | 4594094 | -5 |
| RTX | 53 | 2112283 | -5 |
| GS | 61 | 5183843 | -16 |
| TD | 17 | 303083 | -2 |
| Average | 46.3 | 2798013 | -3.6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 46.3 hedge funds with bullish positions and the average amount invested in these stocks was $2798 million. That figure was $28660 million in AXP’s case. Applied Materials, Inc. (NASDAQ:AMAT) is the most popular stock in this table. On the other hand Sanofi (NYSE:SNY) is the least popular one with only 16 bullish hedge fund positions. American Express Company (NYSE:AXP) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for AXP is 61.6. 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. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 29.6% in 2021 through November 5th and beat the market again by 3.1 percentage points. Unfortunately AXP wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on AXP were disappointed as the stock returned 7.5% since the end of June (through 11/5) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.
