We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (read our latest 10 coronavirus predictions).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended December 31, so let’s proceed with the discussion of the hedge fund sentiment on Avangrid, Inc. (NYSE:AGR).
Is Avangrid, Inc. (NYSE:AGR) a buy right now? The best stock pickers are in a bullish mood. The number of bullish hedge fund bets moved up by 3 in recent months. Our calculations also showed that AGR isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings).
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by more than 41 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_675410" align="aligncenter" width="399"] Zilvinas Mecelis of Covalis Capital[/caption]
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic's significance before most investors. Now we're going to take a gander at the key hedge fund action encompassing Avangrid, Inc. (NYSE:AGR).
Hedge fund activity in Avangrid, Inc. (NYSE:AGR)
At the end of the fourth quarter, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 19% from the third quarter of 2019. By comparison, 13 hedge funds held shares or bullish call options in AGR a year ago. With the smart money's positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
More specifically, Pzena Investment Management was the largest shareholder of Avangrid, Inc. (NYSE:AGR), with a stake worth $131.9 million reported as of the end of September. Trailing Pzena Investment Management was Electron Capital Partners, which amassed a stake valued at $60.7 million. Renaissance Technologies, Covalis Capital, and D E Shaw 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 Avangrid, Inc. (NYSE:AGR), around 16.54% of its 13F portfolio. Electron Capital Partners is also relatively very bullish on the stock, earmarking 7.25 percent of its 13F equity portfolio to AGR.
As one would reasonably expect, key money managers have jumped into Avangrid, Inc. (NYSE:AGR) headfirst. Luminus Management, managed by Jonathan Barrett and Paul Segal, established the most valuable position in Avangrid, Inc. (NYSE:AGR). Luminus Management had $4.5 million invested in the company at the end of the quarter. Minhua Zhang's Weld Capital Management also initiated a $1.7 million position during the quarter. The other funds with new positions in the stock are Peter Muller's PDT Partners and Qing Li's Sciencast Management.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Avangrid, Inc. (NYSE:AGR) but similarly valued. These stocks are Markel Corporation (NYSE:MKL), The Cooper Companies, Inc. (NYSE:COO), Expedia Group, Inc. (NASDAQ:EXPE), and Seagate Technology plc (NASDAQ:STX). All of these stocks' market caps match AGR's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MKL,37,1409964,6 COO,28,764569,-3 EXPE,59,3035242,22 STX,35,2826852,5 Average,39.75,2009157,7.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 39.75 hedge funds with bullish positions and the average amount invested in these stocks was $2009 million. That figure was $370 million in AGR's case. Expedia Group, Inc.(NASDAQ:EXPE) is the most popular stock in this table. On the other hand The Cooper Companies, Inc. (NYSE:COO) is the least popular one with only 28 bullish hedge fund positions. Compared to these stocks Avangrid, Inc. (NYSE:AGR) is even less popular than COO. Hedge funds clearly dropped the ball on AGR as the stock delivered strong returns, though hedge funds' consensus picks still generated respectable returns. 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 10.1 percentage points. These stocks lost 22.3% in 2020 through March 16th but still beat the market by 3.2 percentage points. A small number of hedge funds were also right about betting on AGR as the stock returned -15.7% during the same time period and outperformed the market by an even larger margin.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.