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Did Hedge Funds Make The Right Call On Alliant Energy Corporation (LNT) ?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Alliant Energy Corporation (NYSE:LNT) based on that data and determine whether they were really smart about the stock.

Is Alliant Energy Corporation (NYSE:LNT) undervalued? Investors who are in the know were in an optimistic mood. The number of bullish hedge fund bets inched up by 2 in recent months. Our calculations also showed that LNT 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). LNT was in 30 hedge funds’ portfolios at the end of the first quarter of 2020. There were 28 hedge funds in our database with LNT holdings at the end of the previous quarter.

Video: Watch our video about the top 5 most popular hedge fund stocks.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Jeffrey Talpins of Element Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so we are checking out this tiny lithium stock. Now we’re going to take a look at the new hedge fund action encompassing Alliant Energy Corporation (NYSE:LNT).

How are hedge funds trading Alliant Energy Corporation (NYSE:LNT)?

Heading into the second quarter of 2020, a total of 30 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 7% from one quarter earlier. On the other hand, there were a total of 17 hedge funds with a bullish position in LNT a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is LNT A Good Stock To Buy?

The largest stake in Alliant Energy Corporation (NYSE:LNT) was held by Citadel Investment Group, which reported holding $223.3 million worth of stock at the end of September. It was followed by Zimmer Partners with a $155.5 million position. Other investors bullish on the company included Renaissance Technologies, Millennium Management, and Carlson Capital. In terms of the portfolio weights assigned to each position Zimmer Partners allocated the biggest weight to Alliant Energy Corporation (NYSE:LNT), around 3.45% of its 13F portfolio. Yaupon Capital is also relatively very bullish on the stock, dishing out 2.97 percent of its 13F equity portfolio to LNT.

Consequently, key money managers have been driving this bullishness. Soros Fund Management, managed by George Soros, initiated the largest position in Alliant Energy Corporation (NYSE:LNT). Soros Fund Management had $7.2 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP also initiated a $5.2 million position during the quarter. The other funds with brand new LNT positions are Steve Cohen’s Point72 Asset Management, Greg Eisner’s Engineers Gate Manager, and Paul Tudor Jones’s Tudor Investment Corp.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Alliant Energy Corporation (NYSE:LNT) but similarly valued. We will take a look at Martin Marietta Materials, Inc. (NYSE:MLM), Mid America Apartment Communities Inc (NYSE:MAA), Xylem Inc (NYSE:XYL), and Tyler Technologies, Inc. (NYSE:TYL). This group of stocks’ market values are closest to LNT’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MLM 44 1436776 -8
MAA 26 244541 2
XYL 27 428104 6
TYL 30 405643 9
Average 31.75 628766 2.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 31.75 hedge funds with bullish positions and the average amount invested in these stocks was $629 million. That figure was $602 million in LNT’s case. Martin Marietta Materials, Inc. (NYSE:MLM) is the most popular stock in this table. On the other hand Mid America Apartment Communities Inc (NYSE:MAA) is the least popular one with only 26 bullish hedge fund positions. Alliant Energy Corporation (NYSE:LNT) 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 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 12.3% in 2020 through June 30th and surpassed the market by 15.5 percentage points. Unfortunately LNT wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); LNT investors were disappointed as the stock returned -0.2% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 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.