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Ameriprise Financial, Inc. (AMP): These Hedge Funds Were Caught Wrong Footed

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. Keeping this in mind, let’s take a look at whether Ameriprise Financial, Inc. (NYSE:AMP) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Is Ameriprise Financial, Inc. (NYSE:AMP) a healthy stock for your portfolio? The best stock pickers are becoming hopeful. The number of bullish hedge fund bets moved up by 8 recently. Our calculations also showed that AMP isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings).

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that 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.

Matthew Lindenbaum Basswood Capital

Matthew Lindenbaum of Basswood Capital

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. With all of this in mind we’re going to review the latest hedge fund action encompassing Ameriprise Financial, Inc. (NYSE:AMP).

What does smart money think about Ameriprise Financial, Inc. (NYSE:AMP)?

Heading into the first quarter of 2020, a total of 37 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 28% from the previous quarter. By comparison, 32 hedge funds held shares or bullish call options in AMP a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

When looking at the institutional investors followed by Insider Monkey, Lyrical Asset Management, managed by Andrew Wellington and Jeff Keswin, holds the number one position in Ameriprise Financial, Inc. (NYSE:AMP). Lyrical Asset Management has a $384.2 million position in the stock, comprising 5.2% of its 13F portfolio. The second most bullish fund manager is GLG Partners, managed by Noam Gottesman, which holds a $269.5 million position; 0.9% of its 13F portfolio is allocated to the stock. Other hedge funds and institutional investors that hold long positions contain Cliff Asness’s AQR Capital Management, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Lyrical Asset Management allocated the biggest weight to Ameriprise Financial, Inc. (NYSE:AMP), around 5.23% of its 13F portfolio. L2 Asset Management is also relatively very bullish on the stock, setting aside 1.32 percent of its 13F equity portfolio to AMP.

As industrywide interest jumped, key money managers were breaking ground themselves. Citadel Investment Group, managed by Ken Griffin, initiated the largest position in Ameriprise Financial, Inc. (NYSE:AMP). Citadel Investment Group had $38.6 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also made a $6.5 million investment in the stock during the quarter. The other funds with new positions in the stock are Daniel Johnson’s Gillson Capital, Ray Dalio’s Bridgewater Associates, and Matthew Lindenbaum’s Basswood Capital.

Let’s now take a look at hedge fund activity in other stocks similar to Ameriprise Financial, Inc. (NYSE:AMP). We will take a look at IAC/InterActiveCorp (NASDAQ:IAC), Smith & Nephew plc (NYSE:SNN), Synopsys, Inc. (NASDAQ:SNPS), and Veeva Systems Inc (NYSE:VEEV). All of these stocks’ market caps match AMP’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
IAC 71 3319257 16
SNN 3 131490 -3
SNPS 45 1164571 0
VEEV 44 766454 8
Average 40.75 1345443 5.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 40.75 hedge funds with bullish positions and the average amount invested in these stocks was $1345 million. That figure was $1123 million in AMP’s case. IAC/InterActiveCorp (NASDAQ:IAC) is the most popular stock in this table. On the other hand Smith & Nephew plc (NYSE:SNN) is the least popular one with only 3 bullish hedge fund positions. Ameriprise Financial, Inc. (NYSE:AMP) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 beat the market by 3.2 percentage points. Unfortunately AMP wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); AMP investors were disappointed as the stock returned -47.9% 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 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in Q1.

5 Most Popular Stocks Among Hedge Funds
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.

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