Is The AES Corporation (NYSE:AES) undervalued? Investors who are in the know are becoming less hopeful. The number of long hedge fund positions shrunk by 1 in recent months.
In the eyes of most market participants, hedge funds are assumed to be underperforming, outdated financial tools of yesteryear. While there are over 8000 funds with their doors open at the moment, we at Insider Monkey hone in on the upper echelon of this group, about 450 funds. It is estimated that this group has its hands on most of the smart money’s total asset base, and by watching their highest performing equity investments, we have figured out a few investment strategies that have historically outperformed the market. Our small-cap hedge fund strategy outpaced the S&P 500 index by 18 percentage points a year for a decade in our back tests, and since we’ve began to sharing our picks with our subscribers at the end of August 2012, we have outclassed the S&P 500 index by 23.3 percentage points in 8 months (see all of our picks from August).
Equally as key, positive insider trading activity is another way to break down the stock market universe. As the old adage goes: there are a variety of incentives for a bullish insider to drop shares of his or her company, but just one, very obvious reason why they would initiate a purchase. Many empirical studies have demonstrated the market-beating potential of this strategy if shareholders know where to look (learn more here).
Consequently, let’s take a glance at the latest action regarding The AES Corporation (NYSE:AES).
What does the smart money think about The AES Corporation (NYSE:AES)?
Heading into Q2, a total of 20 of the hedge funds we track were long in this stock, a change of -5% from the first quarter. With hedgies’ sentiment swirling, there exists a select group of notable hedge fund managers who were upping their holdings substantially.
When looking at the hedgies we track, Phill Gross and Robert Atchinson’s Adage Capital Management had the most valuable position in The AES Corporation (NYSE:AES), worth close to $52.6 million, accounting for 0.2% of its total 13F portfolio. The second largest stake is held by Israel Englander of Millennium Management, with a $45.2 million position; 0.2% of its 13F portfolio is allocated to the company. Remaining hedge funds that are bullish include D. E. Shaw’s D E Shaw, Glenn Russell Dubin’s Highbridge Capital Management and Mario Gabelli’s GAMCO Investors.
Judging by the fact that The AES Corporation (NYSE:AES) has faced bearish sentiment from hedge fund managers, it’s safe to say that there were a few hedgies that elected to cut their full holdings in Q1. At the top of the heap, Ray Dalio’s Bridgewater Associates dumped the biggest position of the “upper crust” of funds we key on, comprising close to $8.1 million in stock.. Jim Simons’s fund, Renaissance Technologies, also dumped its stock, about $4.6 million worth. These transactions are interesting, as aggregate hedge fund interest fell by 1 funds in Q1.
What have insiders been doing with The AES Corporation (NYSE:AES)?
Bullish insider trading is at its handiest when the primary stock in question has experienced transactions within the past 180 days. Over the last half-year time frame, The AES Corporation (NYSE:AES) has seen 2 unique insiders purchasing, and 1 insider sales (see the details of insider trades here).
Let’s check out hedge fund and insider activity in other stocks similar to The AES Corporation (NYSE:AES). These stocks are CMS Energy Corporation (NYSE:CMS), Entergy Corporation (NYSE:ETR), Companhia Energetica Minas Gerais (ADR) (NYSE:CIG), Wisconsin Energy Corporation (NYSE:WEC), and Calpine Corporation (NYSE:CPN). This group of stocks are in the electric utilities industry and their market caps are similar to AES’s market cap.