While the market driven by short-term sentiment influenced by the accommodative interest rate environment in the US, virus news and stimulus spending, many smart money investors are starting to get cautious towards the current bull run since March, 2020 and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 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 American Express Company (NYSE:AXP).
Is AXP a good stock to buy? American Express Company (NYSE:AXP) has seen a decrease in hedge fund sentiment lately. American Express Company (NYSE:AXP) was in 53 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic is 60. There were 60 hedge funds in our database with AXP positions at the end of the fourth quarter. Our calculations also showed that AXP isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Ryan Tolkin, CIO of Schonfeld Strategic Advisors
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Do Hedge Funds Think AXP Is A Good Stock To Buy Now?
At the end of the first quarter, a total of 53 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -12% from the fourth quarter of 2020. The graph below displays the number of hedge funds with bullish position in AXP over the last 23 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Berkshire Hathaway was the largest shareholder of American Express Company (NYSE:AXP), with a stake worth $21443.8 million reported as of the end of March. Trailing Berkshire Hathaway was Fisher Asset Management, which amassed a stake valued at $2147.7 million. GAMCO Investors, Citadel Investment Group, 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 15.52% of its 13F portfolio. Berkshire Hathaway is also relatively very bullish on the stock, earmarking 7.93 percent of its 13F equity portfolio to AXP.
Judging by the fact that American Express Company (NYSE:AXP) has faced bearish sentiment from hedge fund managers, we can see that there was a specific group of fund managers who sold off their entire stakes in the first quarter. Intriguingly, Andreas Halvorsen's Viking Global sold off the biggest investment of all the hedgies followed by Insider Monkey, totaling close to $631.7 million in stock. Eashwar Krishnan's fund, Tybourne Capital Management, also said goodbye to its stock, about $139.7 million worth. These transactions are important to note, as aggregate hedge fund interest fell by 7 funds in the first quarter.
Let's check out hedge fund activity in other stocks similar to American Express Company (NYSE:AXP). We will take a look at PetroChina Company Limited (NYSE:PTR), Airbnb, Inc. (NASDAQ:ABNB), Goldman Sachs Group, Inc. (NYSE:GS), 3M Company (NYSE:MMM), American Tower Corporation (NYSE:AMT), The Estee Lauder Companies Inc (NYSE:EL), and Intuit Inc. (NASDAQ:INTU). This group of stocks' market caps resemble AXP's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PTR,8,73088,3 ABNB,52,2417824,-16 GS,77,5057213,1 MMM,41,1519815,-3 AMT,58,4593727,-3 EL,59,4103128,8 INTU,68,4707761,0 Average,51.9,3210365,-1.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 51.9 hedge funds with bullish positions and the average amount invested in these stocks was $3210 million. That figure was $24475 million in AXP's case. Goldman Sachs Group, Inc. (NYSE:GS) is the most popular stock in this table. On the other hand PetroChina Company Limited (NYSE:PTR) is the least popular one with only 8 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 57.1. 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 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 17.2% in 2021 through June 11th and still beat the market by 3.3 percentage points. Hedge funds were also right about betting on AXP as the stock returned 16.3% since the end of Q1 (through 6/11) 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.