Hedge Funds Cashing Out Of Alliant Energy Corporation (LNT)

How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Alliant Energy Corporation (NASDAQ:LNT) and determine whether hedge funds had an edge regarding this stock.

Alliant Energy Corporation (NASDAQ:LNT) has seen a decrease in enthusiasm from smart money of late. Alliant Energy Corporation (NASDAQ:LNT) was in 23 hedge funds’ portfolios at the end of June. The all time high for this statistics is 30. There were 30 hedge funds in our database with LNT holdings at the end of March. Our calculations also showed that LNT isn’t among the 30 most popular stocks among hedge funds (click for Q2 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 56 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 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Michael Gelband of ExodusPoint Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers after its stock price crashed. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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 website to get excerpts of these letters in your inbox. With all of this in mind we’re going to take a look at the recent hedge fund action regarding Alliant Energy Corporation (NASDAQ:LNT).

What does smart money think about Alliant Energy Corporation (NASDAQ:LNT)?

Heading into the third quarter of 2020, a total of 23 of the hedge funds tracked by Insider Monkey were long this stock, a change of -23% from one quarter earlier. By comparison, 26 hedge funds held shares or bullish call options in LNT a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

When looking at the institutional investors followed by Insider Monkey, Zimmer Partners, managed by Stuart J. Zimmer, holds the biggest position in Alliant Energy Corporation (NASDAQ:LNT). Zimmer Partners has a $188.2 million position in the stock, comprising 2.6% of its 13F portfolio. The second largest stake is held by Ken Griffin of Citadel Investment Group, with a $58.4 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining professional money managers with similar optimism encompass Renaissance Technologies, Cliff Asness’s AQR Capital Management and Michael Gelband’s ExodusPoint Capital. In terms of the portfolio weights assigned to each position Yaupon Capital allocated the biggest weight to Alliant Energy Corporation (NASDAQ:LNT), around 7.51% of its 13F portfolio. Zimmer Partners is also relatively very bullish on the stock, earmarking 2.55 percent of its 13F equity portfolio to LNT.

Since Alliant Energy Corporation (NASDAQ:LNT) has faced bearish sentiment from the smart money, it’s safe to say that there were a few funds that elected to cut their positions entirely in the second quarter. It’s worth mentioning that Clint Carlson’s Carlson Capital dropped the biggest position of the 750 funds followed by Insider Monkey, totaling close to $27.8 million in stock, and George Soros’s Soros Fund Management was right behind this move, as the fund cut about $7.2 million worth. These transactions are interesting, as aggregate hedge fund interest dropped by 7 funds in the second quarter.

Let’s check out hedge fund activity in other stocks similar to Alliant Energy Corporation (NASDAQ:LNT). We will take a look at Extra Space Storage, Inc. (NYSE:EXR), IDEX Corporation (NYSE:IEX), KeyCorp (NYSE:KEY), POSCO (NYSE:PKX), NICE Ltd (NASDAQ:NICE), Imperial Oil Limited (NYSE:IMO), and ArcelorMittal (NYSE:MT). This group of stocks’ market caps match LNT’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
EXR 27 176001 11
IEX 31 575412 -2
KEY 37 212865 -6
PKX 10 49629 -1
NICE 19 489930 -3
IMO 11 21537 -2
MT 19 266529 6
Average 22 255986 0.4

View table here if you experience formatting issues.

As you can see these stocks had an average of 22 hedge funds with bullish positions and the average amount invested in these stocks was $256 million. That figure was $377 million in LNT’s case. KeyCorp (NYSE:KEY) is the most popular stock in this table. On the other hand POSCO (NYSE:PKX) is the least popular one with only 10 bullish hedge fund positions. Alliant Energy Corporation (NASDAQ:LNT) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for LNT is 45.1. 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 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 24.8% in 2020 through the end of September and beat the market by 19.3 percentage points. Unfortunately LNT wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on LNT were disappointed as the stock returned 8.7% in Q3 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 many of these stocks already outperformed the market so far this year.

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