Hedge Funds Are Dumping The AES Corporation (AES)

As we already know from media reports and hedge fund investor letters, hedge funds delivered their best returns in a decade. Most investors who decided to stick with hedge funds after a rough 2018 recouped their losses by the end of the fourth quarter of 2019. A significant number of hedge funds continued their strong performance in 2020 and 2021 as well. We get to see hedge funds’ thoughts towards the market and individual stocks by aggregating their quarterly portfolio movements and reading their investor letters. In this article, we will particularly take a look at what hedge funds think about The AES Corporation (NYSE:AES).

Is The AES Corporation (NYSE:AES) a buy, sell, or hold? The best stock pickers were cutting their exposure. The number of bullish hedge fund bets were trimmed by 12 in recent months. The AES Corporation (NYSE:AES) was in 39 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 51. Our calculations also showed that AES isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 51 hedge funds in our database with AES holdings at the end of March.

If you’d ask most shareholders, hedge funds are assumed to be worthless, outdated financial tools of yesteryear. While there are greater than 8000 funds in operation today, We choose to focus on the elite of this club, around 850 funds. These hedge fund managers watch over the lion’s share of the smart money’s total capital, and by tailing their unrivaled investments, Insider Monkey has identified several investment strategies that have historically outpaced the market. Insider Monkey’s flagship short hedge fund strategy exceeded the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Also, our monthly newsletter’s portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, we like undervalued, EBITDA-positive growth stocks, so we are checking out stock pitches like this emerging biotech stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Now we’re going to review the recent hedge fund action surrounding The AES Corporation (NYSE:AES).

Do Hedge Funds Think AES Is A Good Stock To Buy Now?

At the end of the second quarter, a total of 39 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -24% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards AES over the last 24 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, William B. Gray’s Orbis Investment Management has the biggest position in The AES Corporation (NYSE:AES), worth close to $320.1 million, corresponding to 2% of its total 13F portfolio. Sitting at the No. 2 spot is Electron Capital Partners, led by Jos Shaver, holding a $227.4 million position; 11% of its 13F portfolio is allocated to the stock. Remaining members of the smart money that hold long positions comprise John Smith Clark’s Southpoint Capital Advisors, Israel Englander’s Millennium Management and Stuart J. Zimmer’s Zimmer Partners. In terms of the portfolio weights assigned to each position Electron Capital Partners allocated the biggest weight to The AES Corporation (NYSE:AES), around 11% of its 13F portfolio. SW Investment Management is also relatively very bullish on the stock, designating 7.48 percent of its 13F equity portfolio to AES.

Since The AES Corporation (NYSE:AES) has faced falling interest from the aggregate hedge fund industry, it’s safe to say that there were a few hedgies who sold off their entire stakes last quarter. It’s worth mentioning that Jeff Ubben’s Inclusive Capital dropped the biggest stake of all the hedgies tracked by Insider Monkey, totaling close to $143.3 million in stock, and Zach Schreiber’s Point State Capital was right behind this move, as the fund sold off about $58.4 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest fell by 12 funds last quarter.

Let’s also examine hedge fund activity in other stocks similar to The AES Corporation (NYSE:AES). These stocks are ASE Technology Holding Co., Ltd. (NYSE:ASX), PerkinElmer, Inc. (NYSE:PKI), Viatris Inc. (NASDAQ:VTRS), J.B. Hunt Transport Services, Inc. (NASDAQ:JBHT), Omnicom Group Inc. (NYSE:OMC), Principal Financial Group Inc (NASDAQ:PFG), and Huazhu Group Limited (NASDAQ:HTHT). This group of stocks’ market valuations match AES’s market valuation.

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As you can see these stocks had an average of 27.6 hedge funds with bullish positions and the average amount invested in these stocks was $805 million. That figure was $1423 million in AES’s case. Viatris Inc. (NASDAQ:VTRS) is the most popular stock in this table. On the other hand ASE Technology Holding Co., Ltd. (NYSE:ASX) is the least popular one with only 7 bullish hedge fund positions. The AES Corporation (NYSE:AES) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for AES is 50.7. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 21.8% in 2021 through October 11th and beat the market again by 4.4 percentage points. Unfortunately AES wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on AES were disappointed as the stock returned -7.4% since the end of June (through 10/11) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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