Hedge Funds Are Cutting Exposure To Avangrid, Inc. (AGR)

In this article you are going to find out whether hedge funds think Avangrid, Inc. (NYSE:AGR) 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 Avangrid, Inc. (NYSE:AGR) the right pick for your portfolio? Hedge funds are turning less bullish. The number of long hedge fund bets shrunk by 1 lately. Our calculations also showed that AGR 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.


Ray Dalio of Bridgewater Associates

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the 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 take a look at the new hedge fund action surrounding Avangrid, Inc. (NYSE:AGR).

How have hedgies been trading Avangrid, Inc. (NYSE:AGR)?

At Q1’s end, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of -5% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards AGR over the last 18 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is AGR A Good Stock To Buy?

More specifically, Pzena Investment Management was the largest shareholder of Avangrid, Inc. (NYSE:AGR), with a stake worth $121.9 million reported as of the end of September. Trailing Pzena Investment Management was Renaissance Technologies, which amassed a stake valued at $51.9 million. Electron Capital Partners, Citadel Investment Group, and D E Shaw 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 Electron Capital Partners allocated the biggest weight to Avangrid, Inc. (NYSE:AGR), around 3.77% of its 13F portfolio. Pzena Investment Management is also relatively very bullish on the stock, dishing out 0.92 percent of its 13F equity portfolio to AGR.

Seeing as Avangrid, Inc. (NYSE:AGR) has witnessed bearish sentiment from the aggregate hedge fund industry, we can see that there was a specific group of money managers that decided to sell off their entire stakes last quarter. It’s worth mentioning that Zilvinas Mecelis’s Covalis Capital dumped the largest stake of the 750 funds followed by Insider Monkey, totaling about $41.7 million in stock, and Jonathan Barrett and Paul Segal’s Luminus Management was right behind this move, as the fund dropped about $4.5 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest fell by 1 funds last quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Avangrid, Inc. (NYSE:AGR). We will take a look at Take-Two Interactive Software, Inc. (NASDAQ:TTWO), M&T Bank Corporation (NYSE:MTB), W.W. Grainger, Inc. (NYSE:GWW), and CDW Corporation (NASDAQ:CDW). This group of stocks’ market caps are similar to AGR’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TTWO 66 1949928 7
MTB 21 687380 -11
GWW 26 345842 -3
CDW 36 947126 6
Average 37.25 982569 -0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 37.25 hedge funds with bullish positions and the average amount invested in these stocks was $983 million. That figure was $243 million in AGR’s case. Take-Two Interactive Software, Inc. (NASDAQ:TTWO) is the most popular stock in this table. On the other hand M&T Bank Corporation (NYSE:MTB) is the least popular one with only 21 bullish hedge fund positions. Compared to these stocks Avangrid, Inc. (NYSE:AGR) is even less popular than MTB. Hedge funds dodged a bullet by taking a bearish stance towards AGR. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.4% in 2020 through June 22nd but managed to beat the market by 15.9 percentage points. Unfortunately AGR wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); AGR investors were disappointed as the stock returned -4.3% during the second quarter (through June 22nd) 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 so far in 2020.

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