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While the market driven by short-term sentiment influenced by the accommodative interest rate environment in the US, virus news and stimulus talks, 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 30,000 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 Ameren Corporation (NYSE:AEE).
Is AEE a good stock to buy now? Money managers were buying. The number of bullish hedge fund positions moved up by 1 recently. Ameren Corporation (NYSE:AEE) was in 20 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistic is 32. Our calculations also showed that AEE isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). There were 19 hedge funds in our database with AEE holdings at the end of June.
Video: Watch our video about the top 5 most popular hedge fund stocks.
To the average investor there are tons of indicators market participants put to use to grade their holdings. Two of the less known indicators are hedge fund and insider trading sentiment. Our researchers have shown that, historically, those who follow the top picks of the top investment managers can outperform the broader indices by a healthy margin (see the details here).
Cliff Asness of AQR Capital Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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. Now let's take a look at the recent hedge fund action encompassing Ameren Corporation (NYSE:AEE).
Do Hedge Funds Think AEE Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 5% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in AEE over the last 21 quarters. With hedge funds' capital changing hands, there exists a few noteworthy hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in Ameren Corporation (NYSE:AEE), which was worth $134.2 million at the end of the third quarter. On the second spot was Zimmer Partners which amassed $132.7 million worth of shares. AQR Capital Management, D E Shaw, 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 Zimmer Partners allocated the biggest weight to Ameren Corporation (NYSE:AEE), around 2.05% of its 13F portfolio. Point State Capital is also relatively very bullish on the stock, earmarking 0.39 percent of its 13F equity portfolio to AEE.
As one would reasonably expect, key money managers were leading the bulls' herd. Zimmer Partners, managed by Stuart J. Zimmer, established the biggest position in Ameren Corporation (NYSE:AEE). Zimmer Partners had $132.7 million invested in the company at the end of the quarter. Zach Schreiber's Point State Capital also initiated a $14.8 million position during the quarter. The other funds with brand new AEE positions are Benjamin A. Smith's Laurion Capital Management, Mark McMeans's Brasada Capital Management, and Dmitry Balyasny's Balyasny Asset Management.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Ameren Corporation (NYSE:AEE) but similarly valued. We will take a look at Delta Air Lines, Inc. (NYSE:DAL), Occidental Petroleum Corporation (NYSE:OXY), Agnico Eagle Mines Limited (NYSE:AEM), Edison International (NYSE:EIX), KKR & Co Inc. (NYSE:KKR), W.W. Grainger, Inc. (NYSE:GWW), and Equity Residential (NYSE:EQR). This group of stocks' market caps are similar to AEE's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position DAL,43,753247,4 OXY,43,1173828,9 AEM,28,667215,-2 EIX,28,1125066,-9 KKR,50,3657048,5 GWW,28,391187,0 EQR,27,526296,-6 Average,35.3,1184841,0.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 35.3 hedge funds with bullish positions and the average amount invested in these stocks was $1185 million. That figure was $521 million in AEE's case. KKR & Co Inc. (NYSE:KKR) is the most popular stock in this table. On the other hand Equity Residential (NYSE:EQR) is the least popular one with only 27 bullish hedge fund positions. Compared to these stocks Ameren Corporation (NYSE:AEE) is even less popular than EQR. Our overall hedge fund sentiment score for AEE is 24.8. 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. Hedge funds dodged a bullet by taking a bearish stance towards AEE. 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 percentage points. These stocks gained 30.7% in 2020 through December 14th but managed to beat the market again by 15.8 percentage points. Unfortunately AEE wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); AEE investors were disappointed as the stock returned -1.7% since the end of the third quarter (through 12/14) 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 2020.
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Disclosure: None. This article was originally published at Insider Monkey.