We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn't mean that they don't have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Atlantica Sustainable Infrastructure plc (NASDAQ:AY) and determine whether hedge funds skillfully traded this stock.
Atlantica Sustainable Infrastructure plc (NASDAQ:AY) investors should be aware of a decrease in support from the world's most elite money managers recently. Our calculations also showed that AY 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.
According to most market participants, hedge funds are assumed to be underperforming, old financial vehicles of yesteryear. While there are more than 8000 funds with their doors open today, We hone in on the upper echelon of this group, about 850 funds. It is estimated that this group of investors administer the majority of all hedge funds' total capital, and by tailing their finest picks, Insider Monkey has deciphered various investment strategies that have historically outrun the market. Insider Monkey's flagship short hedge fund strategy defeated the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
[caption id="attachment_687238" align="aligncenter" width="400"] Philip Hempleman of Ardsley Partners[/caption]
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, we take a look at lists like the 10 biggest gold mining companies to identify emerging trends that are likely to lead to 1000% gains in the coming years. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now let's review the latest hedge fund action encompassing Atlantica Sustainable Infrastructure plc (NASDAQ:AY).
Hedge fund activity in Atlantica Sustainable Infrastructure plc (NASDAQ:AY)
At the end of the first quarter, a total of 13 of the hedge funds tracked by Insider Monkey were long this stock, a change of -19% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in AY over the last 18 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Arrowstreet Capital was the largest shareholder of Atlantica Sustainable Infrastructure plc (NASDAQ:AY), with a stake worth $19.3 million reported as of the end of September. Trailing Arrowstreet Capital was GLG Partners, which amassed a stake valued at $14 million. Renaissance Technologies, Two Sigma Advisors, and Moore Global Investments 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 Blackstart Capital allocated the biggest weight to Atlantica Sustainable Infrastructure plc (NASDAQ:AY), around 4.41% of its 13F portfolio. Ecofin Ltd is also relatively very bullish on the stock, designating 1.75 percent of its 13F equity portfolio to AY.
Since Atlantica Sustainable Infrastructure plc (NASDAQ:AY) has experienced a decline in interest from the smart money, it's safe to say that there exists a select few money managers who sold off their entire stakes by the end of the first quarter. At the top of the heap, Philip Hempleman's Ardsley Partners dropped the largest position of the 750 funds followed by Insider Monkey, totaling close to $6.5 million in stock. Paul Marshall and Ian Wace's fund, Marshall Wace LLP, also sold off its stock, about $5.4 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest fell by 3 funds by the end of the first quarter.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Atlantica Sustainable Infrastructure plc (NASDAQ:AY) but similarly valued. We will take a look at Brooks Automation, Inc. (NASDAQ:BRKS), Mercury General Corporation (NYSE:MCY), Sabra Health Care REIT Inc (NASDAQ:SBRA), and Itron, Inc. (NASDAQ:ITRI). This group of stocks' market values are similar to AY's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BRKS,18,98547,-10 MCY,22,193565,1 SBRA,17,146830,-10 ITRI,19,246826,-2 Average,19,171442,-5.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $171 million. That figure was $77 million in AY's case. Mercury General Corporation (NYSE:MCY) is the most popular stock in this table. On the other hand Sabra Health Care REIT Inc (NASDAQ:SBRA) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks Atlantica Sustainable Infrastructure plc (NASDAQ:AY) is even less popular than SBRA. Hedge funds clearly dropped the ball on AY as the stock delivered strong returns, though hedge funds' consensus picks still generated respectable returns. 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 13.3% in 2020 through June 25th and still beat the market by 16.8 percentage points. A small number of hedge funds were also right about betting on AY as the stock returned 29.2% so far in the second quarter and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.