We at Insider Monkey have gone over 821 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, near the height of the coronavirus market crash. In this article, we look at what those funds think of American Electric Power Company, Inc. (NYSE:AEP) based on that data.
Is American Electric Power Company, Inc. (NYSE:AEP) undervalued? Investors who are in the know are taking an optimistic view. The number of long hedge fund bets rose by 4 lately. Our calculations also showed that AEP 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.
According to most traders, hedge funds are perceived as worthless, old investment tools of the past. While there are greater than 8000 funds in operation at present, Our researchers look at the masters of this club, around 850 funds. These money managers shepherd most of the smart money’s total asset base, and by tailing their best equity investments, Insider Monkey has discovered a number of investment strategies that have historically exceeded Mr. Market. Insider Monkey’s flagship short hedge fund strategy defeated the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
At Insider Monkey 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 this one. 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. Now let’s view the latest hedge fund action encompassing American Electric Power Company, Inc. (NYSE:AEP).
What have hedge funds been doing with American Electric Power Company, Inc. (NYSE:AEP)?
At Q1’s end, a total of 38 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 12% from the fourth quarter of 2019. On the other hand, there were a total of 35 hedge funds with a bullish position in AEP a year ago. With the smart money’s sentiment swirling, there exists a select group of notable hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in American Electric Power Company, Inc. (NYSE:AEP), which was worth $442.3 million at the end of the third quarter. On the second spot was AQR Capital Management which amassed $120.1 million worth of shares. Citadel Investment Group, D E Shaw, and Zimmer Partners 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 Ecofin Ltd allocated the biggest weight to American Electric Power Company, Inc. (NYSE:AEP), around 2.79% of its 13F portfolio. Wexford Capital is also relatively very bullish on the stock, dishing out 1.88 percent of its 13F equity portfolio to AEP.
As aggregate interest increased, key money managers were breaking ground themselves. Zimmer Partners, managed by Stuart J. Zimmer, assembled the largest position in American Electric Power Company, Inc. (NYSE:AEP). Zimmer Partners had $75.9 million invested in the company at the end of the quarter. Steve Cohen’s Point72 Asset Management also initiated a $53.5 million position during the quarter. The other funds with new positions in the stock are Zach Schreiber’s Point State Capital, Andrew Weiss’s Weiss Asset Management, and Charles Davidson and Joseph Jacobs’s Wexford Capital.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as American Electric Power Company, Inc. (NYSE:AEP) but similarly valued. These stocks are Waste Management, Inc. (NYSE:WM), Edwards Lifesciences Corporation (NYSE:EW), L3Harris Technologies, Inc. (NASDAQ:LHX), and Banco Santander, S.A. (NYSE:SAN). This group of stocks’ market valuations are similar to AEP’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 37.5 hedge funds with bullish positions and the average amount invested in these stocks was $1478 million. That figure was $1071 million in AEP’s case. Edwards Lifesciences Corporation (NYSE:EW) is the most popular stock in this table. On the other hand Banco Santander, S.A. (NYSE:SAN) is the least popular one with only 18 bullish hedge fund positions. American Electric Power Company, Inc. (NYSE:AEP) is not the most popular stock in this group but hedge fund interest is still above average. 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 8.3% in 2020 through the end of May but beat the market by 13.2 percentage points. Unfortunately AEP wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on AEP were disappointed as the stock returned 7.5% during the same time period 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.
Disclosure: None. This article was originally published at Insider Monkey.