Did Hedge Funds Make The Right Call On Ameriprise Financial, Inc. (AMP) ?

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 Ameriprise Financial, Inc. (NYSE:AMP) based on that data and determine whether they were really smart about the stock.

Ameriprise Financial, Inc. (NYSE:AMP) was in 26 hedge funds’ portfolios at the end of March. AMP has seen a decrease in hedge fund sentiment in recent months. There were 37 hedge funds in our database with AMP positions at the end of the previous quarter. Our calculations also showed that AMP 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).

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 58 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 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Noam Gottesman GLG Partners

Noam Gottesman of GLG Partners

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s take a look at the fresh hedge fund action encompassing Ameriprise Financial, Inc. (NYSE:AMP).

How have hedgies been trading Ameriprise Financial, Inc. (NYSE:AMP)?

At the end of the first quarter, a total of 26 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -30% from the fourth quarter of 2019. By comparison, 34 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.

More specifically, Lyrical Asset Management was the largest shareholder of Ameriprise Financial, Inc. (NYSE:AMP), with a stake worth $212.2 million reported as of the end of September. Trailing Lyrical Asset Management was AQR Capital Management, which amassed a stake valued at $140.5 million. GLG Partners, Citadel Investment Group, and Arrowstreet Capital 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 Lyrical Asset Management allocated the biggest weight to Ameriprise Financial, Inc. (NYSE:AMP), around 5.21% of its 13F portfolio. Basswood Capital is also relatively very bullish on the stock, earmarking 1.13 percent of its 13F equity portfolio to AMP.

Because Ameriprise Financial, Inc. (NYSE:AMP) has experienced a decline in interest from hedge fund managers, it’s easy to see that there exists a select few hedgies that elected to cut their positions entirely in the first quarter. Intriguingly, Louis Bacon’s Moore Global Investments cut the largest investment of the 750 funds followed by Insider Monkey, totaling about $20.8 million in stock. Daniel Johnson’s fund, Gillson Capital, also sold off its stock, about $4.6 million worth. These transactions are interesting, as aggregate hedge fund interest dropped by 11 funds in the first quarter.

Let’s also examine hedge fund activity in other stocks similar to Ameriprise Financial, Inc. (NYSE:AMP). These stocks are Aptiv PLC (NYSE:APTV), Hewlett Packard Enterprise Company (NYSE:HPE), Twilio Inc. (NYSE:TWLO), and TransUnion (NYSE:TRU). This group of stocks’ market caps resemble AMP’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
APTV 33 679352 -13
HPE 29 641977 -12
TWLO 52 1549546 -8
TRU 44 895453 7
Average 39.5 941582 -6.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 39.5 hedge funds with bullish positions and the average amount invested in these stocks was $942 million. That figure was $606 million in AMP’s case. Twilio Inc. (NYSE:TWLO) is the most popular stock in this table. On the other hand Hewlett Packard Enterprise Company (NYSE:HPE) is the least popular one with only 29 bullish hedge fund positions. Compared to these stocks Ameriprise Financial, Inc. (NYSE:AMP) is even less popular than HPE. Hedge funds clearly dropped the ball on AMP as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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 still beat the market by 15.5 percentage points. A small number of hedge funds were also right about betting on AMP as the stock returned 47.7% in the second quarter and outperformed the market by an even larger margin.

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Disclosure: None. This article was originally published at Insider Monkey.