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Last year we predicted the arrival of the first US recession since 2009 and we told in advance that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Ameren Corporation (NYSE:AEE).
Hedge fund interest in Ameren Corporation (NYSE:AEE) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that AEE isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings). The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as Energy Transfer L.P. (NYSE:ET), Qorvo Inc (NASDAQ:QRVO), and ORIX Corporation (NYSE:IX) to gather more data points.
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.
Stuart Zimmer of Zimmer Partners
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, Chuck Schumer recently stated that marijuana legalization will be a Senate priority. So, we are checking out this under the radar stock that will benefit from this. We go through lists like the 10 best battery stocks to pick the next Tesla 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. Keeping this in mind we're going to analyze the latest hedge fund action encompassing Ameren Corporation (NYSE:AEE).
Do Hedge Funds Think AEE Is A Good Stock To Buy Now?
At first quarter's end, a total of 19 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the previous quarter. The graph below displays the number of hedge funds with bullish position in AEE over the last 23 quarters. With the smart money's capital changing hands, there exists a few key hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).
More specifically, AQR Capital Management was the largest shareholder of Ameren Corporation (NYSE:AEE), with a stake worth $73.6 million reported as of the end of March. Trailing AQR Capital Management was D E Shaw, which amassed a stake valued at $58 million. Zimmer Partners, Citadel Investment Group, and Covalis Capital 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 Covalis Capital allocated the biggest weight to Ameren Corporation (NYSE:AEE), around 3.09% of its 13F portfolio. Courage Capital is also relatively very bullish on the stock, dishing out 0.83 percent of its 13F equity portfolio to AEE.
Due to the fact that Ameren Corporation (NYSE:AEE) has witnessed a decline in interest from hedge fund managers, we can see that there were a few fund managers who sold off their positions entirely heading into Q2. Intriguingly, Renaissance Technologies cut the largest stake of the "upper crust" of funds tracked by Insider Monkey, valued at close to $39.2 million in stock, and David Harding's Winton Capital Management was right behind this move, as the fund said goodbye to about $0.9 million worth. These bearish behaviors are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's go over hedge fund activity in other stocks similar to Ameren Corporation (NYSE:AEE). We will take a look at Energy Transfer L.P. (NYSE:ET), Qorvo Inc (NASDAQ:QRVO), ORIX Corporation (NYSE:IX), Horizon Therapeutics Public Limited Company (NASDAQ:HZNP), Ingersoll Rand Inc. (NYSE:IR), Generac Holdings Inc. (NYSE:GNRC), and Tractor Supply Company (NASDAQ:TSCO). All of these stocks' market caps resemble AEE's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ET,25,647725,0 QRVO,41,2329699,-10 IX,5,4886,2 HZNP,48,4177404,-7 IR,35,789022,1 GNRC,36,699301,4 TSCO,29,1191886,-10 Average,31.3,1405703,-2.9 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 31.3 hedge funds with bullish positions and the average amount invested in these stocks was $1406 million. That figure was $266 million in AEE's case. Horizon Therapeutics Public Limited Company (NASDAQ:HZNP) is the most popular stock in this table. On the other hand ORIX Corporation (NYSE:IX) is the least popular one with only 5 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 overall hedge fund sentiment score for AEE is 39.1. 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. 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 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 23.8% in 2021 through July 16th and surpassed the market again by 7.7 percentage points. Unfortunately AEE wasn't nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); AEE investors were disappointed as the stock returned 5.2% since the end of March (through 7/16) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.
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Disclosure: None. This article was originally published at Insider Monkey.