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In this article we will take a look at whether hedge funds think Atmos Energy Corporation (NYSE:ATO) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Is ATO a good stock to buy now? Money managers were reducing their bets on the stock. The number of bullish hedge fund positions were cut by 4 recently. Atmos Energy Corporation (NYSE:ATO) was in 18 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistic is 26. Our calculations also showed that ATO isn't among the 30 most popular stocks among hedge funds (click for Q3 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.
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Ryan Tolkin, CIO of Schonfeld Strategic Advisors
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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 website. With all of this in mind we're going to review the fresh hedge fund action surrounding Atmos Energy Corporation (NYSE:ATO).
Do Hedge Funds Think ATO Is A Good Stock To Buy Now?
At the end of September, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -18% from one quarter earlier. By comparison, 23 hedge funds held shares or bullish call options in ATO a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Atmos Energy Corporation (NYSE:ATO) was held by AQR Capital Management, which reported holding $62.5 million worth of stock at the end of September. It was followed by Adage Capital Management with a $12.5 million position. Other investors bullish on the company included Marshall Wace LLP, D E Shaw, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Quantamental Technologies allocated the biggest weight to Atmos Energy Corporation (NYSE:ATO), around 0.72% of its 13F portfolio. AQR Capital Management is also relatively very bullish on the stock, designating 0.11 percent of its 13F equity portfolio to ATO.
Because Atmos Energy Corporation (NYSE:ATO) has witnessed a decline in interest from the entirety of the hedge funds we track, it's easy to see that there exists a select few funds that elected to cut their full holdings in the third quarter. Intriguingly, Rajiv Jain's GQG Partners cut the largest stake of the 750 funds followed by Insider Monkey, comprising an estimated $44.7 million in stock, and Donald Sussman's Paloma Partners was right behind this move, as the fund cut about $6.6 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest was cut by 4 funds in the third quarter.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Atmos Energy Corporation (NYSE:ATO) but similarly valued. These stocks are Wabtec Corporation (NYSE:WAB), Live Nation Entertainment, Inc. (NYSE:LYV), Pembina Pipeline Corp (NYSE:PBA), Cheniere Energy, Inc. (NYSE:LNG), KeyCorp (NYSE:KEY), United Microelectronics Corp (NYSE:UMC), and ONEOK, Inc. (NYSE:OKE). This group of stocks' market valuations are closest to ATO's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WAB,38,1732099,-1 LYV,50,1716514,6 PBA,12,56123,2 LNG,40,1971024,2 KEY,33,249262,-4 UMC,11,137076,0 OKE,20,239172,-5 Average,29.1,871610,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 29.1 hedge funds with bullish positions and the average amount invested in these stocks was $872 million. That figure was $111 million in ATO's case. Live Nation Entertainment, Inc. (NYSE:LYV) is the most popular stock in this table. On the other hand United Microelectronics Corp (NYSE:UMC) is the least popular one with only 11 bullish hedge fund positions. Atmos Energy Corporation (NYSE:ATO) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for ATO is 30.7. 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. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through December 14th and surpassed the market again by 15.8 percentage points. Unfortunately ATO wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); ATO investors were disappointed as the stock returned 4.8% since the end of September (through 12/14) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.