Hedge Funds Have Never Been This Bullish On AGNC Investment Corp. (AGNC)

In this article you are going to find out whether hedge funds think AGNC Investment Corp. (NASDAQ:AGNC) 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.

AGNC Investment Corp. (NASDAQ:AGNC) has seen an increase in hedge fund sentiment recently. AGNC was in 27 hedge funds’ portfolios at the end of the first quarter of 2020. There were 21 hedge funds in our database with AGNC holdings at the end of the previous quarter. Our calculations also showed that AGNC 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.

To the average investor there are plenty of methods shareholders have at their disposal to analyze publicly traded companies. Two of the most underrated methods are hedge fund and insider trading signals. Our experts have shown that, historically, those who follow the best picks of the best money managers can outperform the market by a significant amount (see the details here).

Scott Bessent of Key Square Capital Management

Scott Bessent of Key Square Capital Management

We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like these. 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. Keeping this in mind let’s take a peek at the recent hedge fund action regarding AGNC Investment Corp. (NASDAQ:AGNC).

How have hedgies been trading AGNC Investment Corp. (NASDAQ:AGNC)?

At the end of the first quarter, a total of 27 of the hedge funds tracked by Insider Monkey were long this stock, a change of 29% from one quarter earlier. On the other hand, there were a total of 15 hedge funds with a bullish position in AGNC a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Parvinder Thiara’s Athanor Capital has the number one position in AGNC Investment Corp. (NASDAQ:AGNC), worth close to $60.8 million, corresponding to 4% of its total 13F portfolio. Sitting at the No. 2 spot is Brian J. Higgins of King Street Capital, with a $42.3 million position; 4.7% of its 13F portfolio is allocated to the company. Other professional money managers that are bullish contain Anthony Bozza’s Lakewood Capital Management, Steve Cohen’s Point72 Asset Management and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position King Street Capital allocated the biggest weight to AGNC Investment Corp. (NASDAQ:AGNC), around 4.73% of its 13F portfolio. Athanor Capital is also relatively very bullish on the stock, setting aside 3.95 percent of its 13F equity portfolio to AGNC.

As one would reasonably expect, some big names were leading the bulls’ herd. Athanor Capital, managed by Parvinder Thiara, created the most outsized position in AGNC Investment Corp. (NASDAQ:AGNC). Athanor Capital had $60.8 million invested in the company at the end of the quarter. Brian J. Higgins’s King Street Capital also made a $42.3 million investment in the stock during the quarter. The other funds with brand new AGNC positions are Anthony Bozza’s Lakewood Capital Management, Steve Cohen’s Point72 Asset Management, and Scott Bessent’s Key Square Capital Management.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as AGNC Investment Corp. (NASDAQ:AGNC) but similarly valued. We will take a look at Melco Resorts & Entertainment Limited (NASDAQ:MLCO), The Scotts Miracle-Gro Company (NYSE:SMG), Pegasystems Inc. (NASDAQ:PEGA), and Huaneng Power International Inc (NYSE:HNP). All of these stocks’ market caps are similar to AGNC’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MLCO 28 482233 -7
SMG 28 256079 -3
PEGA 33 1023977 8
HNP 3 2437 0
Average 23 441182 -0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 23 hedge funds with bullish positions and the average amount invested in these stocks was $441 million. That figure was $303 million in AGNC’s case. Pegasystems Inc. (NASDAQ:PEGA) is the most popular stock in this table. On the other hand Huaneng Power International Inc (NYSE:HNP) is the least popular one with only 3 bullish hedge fund positions. AGNC Investment Corp. (NASDAQ:AGNC) is not the most popular stock in this group but hedge fund interest is still above average. 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 8.3% in 2020 through the end of May but still beat the market by 13.2 percentage points. Hedge funds were also right about betting on AGNC as the stock returned 24.6% in Q2 (through the end of May) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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