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In this article we will take a look at whether hedge funds think Atlantic Power Corp (NYSE:AT) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Atlantic Power Corp (NYSE:AT) investors should pay attention to a decrease in support from the world's most elite money managers recently. Atlantic Power Corp (NYSE:AT) was in 12 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistics is 13. Our calculations also showed that AT isn't among the 30 most popular stocks among hedge funds (click for Q3 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.
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 66 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 13% through November 17th. That's why we believe hedge fund sentiment is an extremely 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 real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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. 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 website. With all of this in mind let's take a look at the fresh hedge fund action encompassing Atlantic Power Corp (NYSE:AT).
Do Hedge Funds Think AT Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -8% from the second quarter of 2020. On the other hand, there were a total of 12 hedge funds with a bullish position in AT a year ago. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Mangrove Partners was the largest shareholder of Atlantic Power Corp (NYSE:AT), with a stake worth $5.8 million reported as of the end of September. Trailing Mangrove Partners was D E Shaw, which amassed a stake valued at $1.3 million. Renaissance Technologies, Arrowstreet Capital, and Citadel Investment Group 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 Mangrove Partners allocated the biggest weight to Atlantic Power Corp (NYSE:AT), around 0.74% of its 13F portfolio. Zebra Capital Management is also relatively very bullish on the stock, earmarking 0.12 percent of its 13F equity portfolio to AT.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Marshall Wace LLP. One hedge fund selling its entire position doesn't always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don't think this is the case in this case because none of the 750+ hedge funds tracked by Insider Monkey identified AT as a viable investment and initiated a position in the stock.
Let's check out hedge fund activity in other stocks similar to Atlantic Power Corp (NYSE:AT). We will take a look at IDT Corporation (NYSE:IDT), Mohawk Group Holdings, Inc. (NASDAQ:MWK), FS Bancorp, Inc. (NASDAQ:FSBW), Aurora Mobile Limited (NASDAQ:JG), Sky Solar Holdings, Ltd. (NASDAQ:SKYS), Taiwan Liposome Company, Ltd. (NASDAQ:TLC), and Hertz Global Holdings, Inc. (NYSE:HTZ). This group of stocks' market valuations resemble AT's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position IDT,7,20910,1 MWK,4,8703,1 FSBW,5,11860,1 JG,1,389,0 SKYS,1,426,0 TLC,1,167,0 HTZ,8,2761,-4 Average,3.9,6459,-0.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 3.9 hedge funds with bullish positions and the average amount invested in these stocks was $6 million. That figure was $12 million in AT's case. Hertz Global Holdings, Inc. (NYSE:HTZ) is the most popular stock in this table. On the other hand Aurora Mobile Limited (NASDAQ:JG) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Atlantic Power Corp (NYSE:AT) is more popular among hedge funds. Our overall hedge fund sentiment score for AT is 81.7. 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. 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 percentage points. These stocks gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. Unfortunately AT wasn't nearly as popular as these 20 stocks and hedge funds that were betting on AT were disappointed as the stock returned 4.1% since the end of the third quarter (through 12/8) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.