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. We at Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Stocks kept going up since then. In this article we look at how hedge funds traded AGNC Investment Corp. (NASDAQ:AGNC) and determine whether the smart money was really smart about this stock.
AGNC Investment Corp. (NASDAQ:AGNC) was in 37 hedge funds' portfolios at the end of the second quarter of 2020. The all time high for this statistics is 27. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. AGNC investors should pay attention to an increase in hedge fund interest lately. There were 27 hedge funds in our database with AGNC positions at the end of the first quarter. Our calculations also showed that AGNC isn't among the 30 most popular stocks among hedge funds (click for Q2 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.
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 101% since March 2017 and outperformed the S&P 500 ETFs by more than 56 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Peter Rathjens of Arrowstreet Capital
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 precious metals prices. So, we are checking out this junior gold mining stock. Legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world 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. Now let's take a look at the latest hedge fund action regarding AGNC Investment Corp. (NASDAQ:AGNC).
What have hedge funds been doing with AGNC Investment Corp. (NASDAQ:AGNC)?
At the end of June, a total of 37 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 37% from the previous quarter. By comparison, 23 hedge funds held shares or bullish call options in AGNC 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.
The largest stake in AGNC Investment Corp. (NASDAQ:AGNC) was held by OZ Management, which reported holding $99.3 million worth of stock at the end of September. It was followed by D E Shaw with a $63.1 million position. Other investors bullish on the company included Arrowstreet Capital, Citadel Investment Group, and Clough Capital Partners. In terms of the portfolio weights assigned to each position Almitas Capital allocated the biggest weight to AGNC Investment Corp. (NASDAQ:AGNC), around 7.57% of its 13F portfolio. One Fin Capital Management is also relatively very bullish on the stock, setting aside 5.3 percent of its 13F equity portfolio to AGNC.
As industrywide interest jumped, specific money managers were leading the bulls' herd. OZ Management, managed by Daniel S. Och, initiated the largest position in AGNC Investment Corp. (NASDAQ:AGNC). OZ Management had $99.3 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital also made a $38.9 million investment in the stock during the quarter. The following funds were also among the new AGNC investors: Charles Clough's Clough Capital Partners, Robert Henry Lynch's Aristeia Capital, and Renaissance Technologies.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as AGNC Investment Corp. (NASDAQ:AGNC) but similarly valued. These stocks are AptarGroup, Inc. (NYSE:ATR), Companhia de Saneamento Básico do Estado de São Paulo - SABESP (NYSE:SBS), WEX Inc (NYSE:WEX), Five9 Inc (NASDAQ:FIVN), Chemed Corporation (NYSE:CHE), Arch Coal Inc (NYSE:ACI), and Ascendis Pharma A/S (NASDAQ:ASND). All of these stocks' market caps match AGNC's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ATR,26,210604,6 SBS,10,270233,2 WEX,24,399174,-11 FIVN,44,1130157,11 CHE,26,351128,1 ACI,30,2773996,30 ASND,31,2509539,-2 Average,27.3,1092119,5.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 27.3 hedge funds with bullish positions and the average amount invested in these stocks was $1092 million. That figure was $458 million in AGNC's case. Five9 Inc (NASDAQ:FIVN) is the most popular stock in this table. On the other hand Companhia de Saneamento Básico do Estado de São Paulo - SABESP (NYSE:SBS) is the least popular one with only 10 bullish hedge fund positions. AGNC Investment Corp. (NASDAQ:AGNC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for AGNC is 79.7. 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 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 33% in 2020 through the end of August and beat the market by 23.2 percentage points. Unfortunately AGNC wasn't nearly as popular as these 10 stocks and hedge funds that were betting on AGNC were disappointed as the stock returned 11.3% 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.
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Disclosure: None. This article was originally published at Insider Monkey.