The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 821 13F filings submitted by hedge funds and prominent investors. These filings show these funds' portfolio positions as of March 31st, 2020. In this article we are going to take a look at smart money sentiment towards Atmos Energy Corporation (NYSE:ATO).
Atmos Energy Corporation (NYSE:ATO) shareholders have witnessed a decrease in hedge fund interest in recent months. ATO was in 21 hedge funds' portfolios at the end of the first quarter of 2020. There were 26 hedge funds in our database with ATO holdings at the end of the previous quarter. Our calculations also showed that ATO isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). Video: Watch our video about the top 5 most popular hedge fund stocks.
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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_255014" align="aligncenter" width="400"] Clint Carlson of Carlson Capital[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let's take a look at the fresh hedge fund action surrounding Atmos Energy Corporation (NYSE:ATO).
What have hedge funds been doing with Atmos Energy Corporation (NYSE:ATO)?
Heading into the second quarter of 2020, a total of 21 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -19% from the previous quarter. The graph below displays the number of hedge funds with bullish position in ATO over the last 18 quarters. With hedge funds' positions undergoing their usual ebb and flow, there exists an "upper tier" of noteworthy hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).
The largest stake in Atmos Energy Corporation (NYSE:ATO) was held by AQR Capital Management, which reported holding $74 million worth of stock at the end of September. It was followed by Adage Capital Management with a $43.1 million position. Other investors bullish on the company included Millennium Management, Carlson Capital, and Renaissance Technologies. In terms of the portfolio weights assigned to each position Quantamental Technologies allocated the biggest weight to Atmos Energy Corporation (NYSE:ATO), around 0.49% of its 13F portfolio. Carlson Capital is also relatively very bullish on the stock, setting aside 0.42 percent of its 13F equity portfolio to ATO.
Since Atmos Energy Corporation (NYSE:ATO) has faced falling interest from the aggregate hedge fund industry, logic holds that there lies a certain "tier" of fund managers that elected to cut their entire stakes last quarter. At the top of the heap, Jonathan Barrett and Paul Segal's Luminus Management dropped the biggest stake of the 750 funds followed by Insider Monkey, totaling an estimated $24 million in stock. Greg Poole's fund, Echo Street Capital Management, also sold off its stock, about $13.8 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest dropped by 5 funds last quarter.
Let's go over hedge fund activity in other stocks similar to Atmos Energy Corporation (NYSE:ATO). We will take a look at Dover Corporation (NYSE:DOV), Healthpeak Properties, Inc. (NYSE:PEAK), Restaurant Brands International Inc (NYSE:QSR), and Lennar Corporation (NYSE:LEN). This group of stocks' market caps resemble ATO's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position DOV,31,644941,2 PEAK,26,292181,0 QSR,41,2250209,-11 LEN,57,1121019,-6 Average,38.75,1077088,-3.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 38.75 hedge funds with bullish positions and the average amount invested in these stocks was $1077 million. That figure was $209 million in ATO's case. Lennar Corporation (NYSE:LEN) is the most popular stock in this table. On the other hand Healthpeak Properties, Inc. (NYSE:PEAK) is the least popular one with only 26 bullish hedge fund positions. Compared to these stocks Atmos Energy Corporation (NYSE:ATO) is even less popular than PEAK. Hedge funds dodged a bullet by taking a bearish stance towards ATO. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.2% in 2020 through June 17th but managed to beat the market by 14.8 percentage points. Unfortunately ATO wasn't nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); ATO investors were disappointed as the stock returned 2.6% during the second quarter (through June 17th) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in 2020.
Disclosure: None. This article was originally published at Insider Monkey.