The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn't the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds' positions on March 31st, about a week after the S&P 500 Index bottomed. We at Insider Monkey have made an extensive database of more than 821 of those established hedge funds and famous value investors' filings. In this article, we analyze how these elite funds and prominent investors traded Ameren Corporation (NYSE:AEE) based on those filings.
Is Ameren Corporation (NYSE:AEE) a buy right now? The best stock pickers are reducing their bets on the stock. The number of long hedge fund positions dropped by 10 recently. Our calculations also showed that AEE 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.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
[caption id="attachment_339348" align="aligncenter" width="399"] Zach Schreiber of Point State 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 go over the recent hedge fund action encompassing Ameren Corporation (NYSE:AEE).
What does smart money think about Ameren Corporation (NYSE:AEE)?
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 -32% from the fourth quarter of 2019. By comparison, 21 hedge funds held shares or bullish call options in AEE a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey's hedge fund database, Renaissance Technologies, holds the largest position in Ameren Corporation (NYSE:AEE). Renaissance Technologies has a $397.9 million position in the stock, comprising 0.4% of its 13F portfolio. Sitting at the No. 2 spot is AQR Capital Management, led by Cliff Asness, holding a $112.1 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors that are bullish include D. E. Shaw's D E Shaw, Ken Griffin's Citadel Investment Group and Israel Englander's Millennium Management. In terms of the portfolio weights assigned to each position Point State Capital allocated the biggest weight to Ameren Corporation (NYSE:AEE), around 0.94% of its 13F portfolio. Invenomic Capital Management is also relatively very bullish on the stock, setting aside 0.81 percent of its 13F equity portfolio to AEE.
Seeing as Ameren Corporation (NYSE:AEE) has faced a decline in interest from the smart money, it's easy to see that there was a specific group of hedgies who were dropping their entire stakes heading into Q4. At the top of the heap, Clint Carlson's Carlson Capital sold off the biggest stake of all the hedgies monitored by Insider Monkey, worth an estimated $57.8 million in stock, and Peter J. Hark's Shelter Harbor Advisors was right behind this move, as the fund said goodbye to about $25 million worth. These transactions are interesting, as total hedge fund interest was cut by 10 funds heading into Q4.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Ameren Corporation (NYSE:AEE) but similarly valued. These stocks are Fastenal Company (NASDAQ:FAST), Interactive Brokers Group, Inc. (NASDAQ:IBKR), Fortis Inc. (NYSE:FTS), and Wipro Limited (NYSE:WIT). This group of stocks' market values are closest to AEE's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FAST,34,588054,1 IBKR,22,779568,-7 FTS,15,347098,1 WIT,7,56972,-5 Average,19.5,442923,-2.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.5 hedge funds with bullish positions and the average amount invested in these stocks was $443 million. That figure was $724 million in AEE's case. Fastenal Company (NASDAQ:FAST) is the most popular stock in this table. On the other hand Wipro Limited (NYSE:WIT) is the least popular one with only 7 bullish hedge fund positions. Ameren Corporation (NYSE:AEE) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds 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 beat the market by 14.8 percentage points. Unfortunately AEE wasn't nearly as popular as these 10 stocks and hedge funds that were betting on AEE were disappointed as the stock returned 0.1% during the same time period 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 many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.