The AES Corporation (AES) Sold Off in Q3 Due to Interest Rate Environment
Massif Capital, an investment management company, released its “Massif Capital Real Assets Strategy” third-quarter 2023 investor letter. A copy of the same can be downloaded here. In the third quarter, the strategy returned -4.6% net of fees bringing YTD returns to -8.73% net. The long book declined by 6.92% while the short book rose by 2.7%. Losses in the long book were driven by a significant decrease in the price of the fund’s exposure to the Industrial, Materials, and Utilities sectors. The Energy sector was the only bright spot in the quarter, along with the short book. In addition, you can check the top 5 holdings of the strategy to know its best picks in 2023.
Massif Capital highlighted stocks like The AES Corporation (NYSE:AES) in the third quarter 2023 investor letter. Headquartered in Arlington, Virginia, The AES Corporation (NYSE:AES) is a diversified power generation and utility company. On November 2, 2023, The AES Corporation (NYSE:AES) stock closed at $15.50 per share. One-month return of The AES Corporation (NYSE:AES) was 22.92%, and its shares lost 40.82% of their value over the last 52 weeks. The AES Corporation (NYSE:AES) has a market capitalization of $10.379 billion.
Massif Capital made the following comment about The AES Corporation (NYSE:AES) in its Q3 2023 investor letter:
"Given interest rates’ elevated state, it is perhaps unsurprising that our utility exposure has fared poorly for us this year. We should have hedged the exposure sooner with a Utility ETF short, but we did not do that until the third quarter, after much of the damage was already done. As noted above, our Utility exposure is second only to our materials exposure in terms of negative impact on the portfolio across both the third quarter and the YTD periods. This is primarily driven by our investment in The AES Corporation (NYSE:AES), which was down roughly 26% in the third quarter and 47% YTD. Our other utility exposure is up for the year, including our short position, which, as noted, was put on in the third quarter, and it is probably something we should have had on the books for the entire year.
We attribute, for right or wrong, the entirety of the sell-off in AES to the interest rate environment. Chart overlays are always tricky, so one should not read too much into them, but as a quick sense check of the claim, if one inverts the move-in rates for a generic 10-year US government bond and overlay it with AES stock price YTD, you get the following:.." (Click here to read the full text)
An overhead view of electricity transmission towers, showing the scale and reach of the company's network.
The AES Corporation (NYSE:AES) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 36 hedge fund portfolios held The AES Corporation (NYSE:AES) at the end of second quarter which was 44 in the previous quarter.
We discussed The AES Corporation (NYSE:AES) in another article and shared best undervalued energy stocks to buy according to analysts. In addition, please check out our hedge fund investor letters Q3 2023 page for more investor letters from hedge funds and other leading investors.
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Disclosure: None. This article is originally published at Insider Monkey.
