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Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 900 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds' 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about American Express Company (NYSE:AXP) in this article.
Is AXP stock a buy or sell? American Express Company (NYSE:AXP) was in 60 hedge funds' portfolios at the end of December. The all time high for this statistic is 58. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. AXP has experienced an increase in hedge fund interest of late. There were 48 hedge funds in our database with AXP holdings at the end of September. Our calculations also showed that AXP isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings).
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. 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 S&P 500 ETFs by 124 percentage points since March 2017 (see the details here).
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. Recently Oregon became the first state to legalize psychedelic mushrooms which are shown to have promising results in treating depression, addiction, and PTSD in early stage academic studies. So, we are checking out this psychedelic drug stock idea right now. We go through lists like the 10 best biotech stocks to invest in to pick the next stock 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 (or at the end of this article). Now we're going to take a gander at the key hedge fund action surrounding American Express Company (NYSE:AXP).
Do Hedge Funds Think AXP Is A Good Stock To Buy Now?
At the end of December, a total of 60 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 25% from the previous quarter. On the other hand, there were a total of 58 hedge funds with a bullish position in AXP a year ago. With hedge funds' positions undergoing their usual ebb and flow, there exists an "upper tier" of key hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Warren Buffett's Berkshire Hathaway has the most valuable position in American Express Company (NYSE:AXP), worth close to $18.3312 billion, corresponding to 6.8% of its total 13F portfolio. The second largest stake is held by Fisher Asset Management, led by Ken Fisher, holding a $1.8115 billion position; the fund has 1.4% of its 13F portfolio invested in the stock. Other professional money managers that are bullish consist of Andreas Halvorsen's Viking Global, Eashwar Krishnan's Tybourne Capital Management and Mario Gabelli's GAMCO Investors. In terms of the portfolio weights assigned to each position Aquamarine Capital Management allocated the biggest weight to American Express Company (NYSE:AXP), around 14.81% of its 13F portfolio. Hi-Line Capital Management is also relatively very bullish on the stock, setting aside 7.57 percent of its 13F equity portfolio to AXP.
As aggregate interest increased, key hedge funds were leading the bulls' herd. Theleme Partners, managed by Patrick Degorce, initiated the most outsized position in American Express Company (NYSE:AXP). Theleme Partners had $110.9 million invested in the company at the end of the quarter. James Parsons's Junto Capital Management also made a $31.9 million investment in the stock during the quarter. The following funds were also among the new AXP investors: Peter Seuss's Prana Capital Management, Dipak Patel's Alight Capital, and Leonard Green's Leonard Green & Partners.
Let's now take a look at hedge fund activity in other stocks similar to American Express Company (NYSE:AXP). These stocks are Zoom Video Communications, Inc. (NASDAQ:ZM), The Estee Lauder Companies Inc (NYSE:EL), Intuitive Surgical, Inc. (NASDAQ:ISRG), General Electric Company (NYSE:GE), Rio Tinto Group (NYSE:RIO), Diageo plc (NYSE:DEO), and GlaxoSmithKline plc (NYSE:GSK). All of these stocks' market caps match AXP's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ZM,59,6002261,3 EL,51,3593398,5 ISRG,49,1802145,-1 GE,69,5684620,24 RIO,26,1711997,3 DEO,23,667041,4 GSK,30,1742036,-1 Average,43.9,3029071,5.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 43.9 hedge funds with bullish positions and the average amount invested in these stocks was $3029 million. That figure was $21887 million in AXP's case. General Electric Company (NYSE:GE) is the most popular stock in this table. On the other hand Diageo plc (NYSE:DEO) is the least popular one with only 23 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 80.2. 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. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 5.3% in 2021 through March 19th and still beat the market by 0.8 percentage points. Hedge funds were also right about betting on AXP as the stock returned 16.8% since the end of Q4 (through 3/19) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.