World-class money managers like Ken Griffin and Barry Rosenstein only invest their wealthy clients' money after undertaking a rigorous examination of any potential stock. They are particularly successful in this regard when it comes to small-cap stocks, which their peerless research gives them a big information advantage on when it comes to judging their worth. It's not surprising then that they generate their biggest returns from these stocks and invest more of their money in these stocks on average than other investors. It's also not surprising then that we pay close attention to these picks ourselves and have built a market-beating investment strategy around them.
Is Ameren Corporation (NYSE:AEE) a bargain? Hedge funds are in a bearish mood. The number of bullish hedge fund positions were trimmed by 2 in recent months. Our calculations also showed that AEE isn't among the 30 most popular stocks among hedge funds.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
Let's check out the key hedge fund action surrounding Ameren Corporation (NYSE:AEE).
How are hedge funds trading Ameren Corporation (NYSE:AEE)?
At the end of the first quarter, a total of 21 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -9% from one quarter earlier. On the other hand, there were a total of 21 hedge funds with a bullish position in AEE a year ago. With the smart money's positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
According to Insider Monkey's hedge fund database, Jim Simons's Renaissance Technologies has the largest position in Ameren Corporation (NYSE:AEE), worth close to $330.4 million, corresponding to 0.3% of its total 13F portfolio. The second largest stake is held by AQR Capital Management, led by Cliff Asness, holding a $283.1 million position; 0.3% of its 13F portfolio is allocated to the stock. Some other professional money managers that hold long positions encompass Noam Gottesman's GLG Partners, Phill Gross and Robert Atchinson's Adage Capital Management and John Overdeck and David Siegel's Two Sigma Advisors.
Due to the fact that Ameren Corporation (NYSE:AEE) has witnessed falling interest from the aggregate hedge fund industry, we can see that there exists a select few money managers who were dropping their full holdings heading into Q3. Interestingly, Andrew Feldstein and Stephen Siderow's Blue Mountain Capital cut the largest investment of the 700 funds tracked by Insider Monkey, totaling close to $4.5 million in stock. Paul Tudor Jones's fund, Tudor Investment Corp, also cut its stock, about $2.3 million worth. These transactions are important to note, as aggregate hedge fund interest dropped by 2 funds heading into Q3.
Let's also examine hedge fund activity in other stocks similar to Ameren Corporation (NYSE:AEE). These stocks are Waters Corporation (NYSE:WAT), Liberty Global Plc (NASDAQ:LBTYK), Mettler-Toledo International Inc. (NYSE:MTD), and The Hartford Financial Services Group Inc (NYSE:HIG). This group of stocks' market valuations match AEE's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WAT,30,689161,-2 LBTYK,33,3302492,1 MTD,18,221886,-4 HIG,37,1332799,7 Average,29.5,1386585,0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 29.5 hedge funds with bullish positions and the average amount invested in these stocks was $1387 million. That figure was $740 million in AEE's case. The Hartford Financial Services Group Inc (NYSE:HIG) is the most popular stock in this table. On the other hand Mettler-Toledo International Inc. (NYSE:MTD) is the least popular one with only 18 bullish hedge fund positions. Ameren Corporation (NYSE:AEE) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. A small number of hedge funds were also right about betting on AEE, though not to the same extent, as the stock returned -0.9% during the same time frame and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.