Do Hedge Funds Love Atmos Energy Corporation (ATO)?

After several tireless days we have finished crunching the numbers from the more than 700 13F filings issued by the successful hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms’ equity portfolios as of September 30. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards Atmos Energy Corporation (NYSE:ATO).

Atmos Energy Corporation (NYSE:ATO) has seen a decrease in support from the world’s most successful money managers of late. There were 13 hedge funds in our database with ATO holdings at the end of the second quarter. At the end of this article we will also compare ATO to other stocks including Philippine Long Distance Telephone (ADR) (NYSE:PHI), Vedanta Ltd (ADR) (NYSE:VEDL), and Dr. Reddy’s Laboratories Limited (ADR) (NYSE:RDY) to get a better sense of its popularity.

We care about hedge fund sentiment because historically hedge funds’ stock picks delivered strong risk adjusted returns. There are certain segments of the market where hedge funds’ stock picks performed much better than its benchmarks. For instance, the 30 most popular mid-cap stocks among the best performing hedge funds returned 18% over the last 12 months outpacing S&P 500 Index by more than 10 percentage points. We developed this strategy 2.5 years ago and started sharing its picks in our quarterly newsletter. It bested the S&P 500 Index ETFs by delivering a solid 39% vs. 22% gain for its benchmarks.

Now, we’re going to review the recent action surrounding Atmos Energy Corporation (NYSE:ATO).

How have hedgies been trading Atmos Energy Corporation (NYSE:ATO)?

Heading into the fourth quarter of 2016, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a drop of 8% from the second quarter of 2016. Below, you can check out the change in hedge fund sentiment towards ATO over the last 5 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Millennium Management, one of the 10 largest hedge funds in the world has the number one position in Atmos Energy Corporation (NYSE:ATO), worth close to $51.5 million, comprising 0.1% of its total 13F portfolio. The second most bullish fund manager is Cliff Asness of AQR Capital Management, with a $49.9 million position; 0.1% of its 13F portfolio is allocated to the stock. Other peers with similar optimism encompass Jonathan Barrett and Paul Segal’s Luminus Management, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and D. E. Shaw’s D E Shaw. We should note that Luminus Management is among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

Because Atmos Energy Corporation (NYSE:ATO) has weathered bearish sentiment from the aggregate hedge fund industry, it’s easy to see that there were a few funds that decided to sell off their full holdings heading into Q4. At the top of the heap, Renaissance Technologies cut the largest position of all the investors followed by Insider Monkey, valued at about $2.9 million in stock. Ken Griffin’s fund, Citadel Investment Group, also sold off its call options, worth about $0.6 million.

Let’s now review hedge fund activity in other stocks similar to Atmos Energy Corporation (NYSE:ATO). These stocks are Philippine Long Distance Telephone (ADR) (NYSE:PHI), Vedanta Ltd (ADR) (NYSE:VEDL), Dr. Reddy’s Laboratories Limited (ADR) (NYSE:RDY), and iShares NASDAQ Biotechnology Index (ETF) (NASDAQ:IBB). All of these stocks’ market caps resemble ATO’s market cap.

As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $193 million. That figure was $188 million in ATO’s case. iShares NASDAQ Biotechnology Index (ETF) (NASDAQ:IBB) is the most popular stock in this table. On the other hand Philippine Long Distance Telephone (ADR) (NYSE:PHI) is the least popular one with only 4 bullish hedge fund positions. Atmos Energy Corporation (NYSE:ATO) 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. In this regard IBB might be a better candidate to consider taking a long position in.

Disclosure: none