We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Peltz’s recent General Electric losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Aegion Corp (NASDAQ:AEGN).
Is AEGN a good stock to buy now? Money managers were in a bearish mood. The number of long hedge fund bets were cut by 1 lately. Aegion Corp (NASDAQ:AEGN) was in 9 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 16. Our calculations also showed that AEGN isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). There were 10 hedge funds in our database with AEGN holdings at the end of June.
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 66 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 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
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. We go through lists like the 15 best blue chip stocks 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. Now we’re going to view the key hedge fund action regarding Aegion Corp (NASDAQ:AEGN).
Do Hedge Funds Think AEGN Is A Good Stock To Buy Now?
At third quarter’s end, a total of 9 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -10% from the second quarter of 2020. The graph below displays the number of hedge funds with bullish position in AEGN over the last 21 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Renaissance Technologies has the largest position in Aegion Corp (NASDAQ:AEGN), worth close to $6 million, corresponding to less than 0.1%% of its total 13F portfolio. On Renaissance Technologies’s heels is Chuck Royce of Royce & Associates, with a $3 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other members of the smart money that hold long positions include Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Mario Gabelli’s GAMCO Investors and D. E. Shaw’s D E Shaw. In terms of the portfolio weights assigned to each position Zebra Capital Management allocated the biggest weight to Aegion Corp (NASDAQ:AEGN), around 0.42% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, designating 0.03 percent of its 13F equity portfolio to AEGN.
Seeing as Aegion Corp (NASDAQ:AEGN) has witnessed a decline in interest from hedge fund managers, it’s easy to see that there is a sect of hedge funds who were dropping their entire stakes by the end of the third quarter. Intriguingly, Israel Englander’s Millennium Management dumped the largest position of all the hedgies watched by Insider Monkey, comprising close to $0.3 million in stock, and Thomas Bailard’s Bailard Inc was right behind this move, as the fund cut about $0.2 million worth. These transactions are important to note, as aggregate hedge fund interest was cut by 1 funds by the end of the third quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Aegion Corp (NASDAQ:AEGN) but similarly valued. These stocks are Mercer International Inc. (NASDAQ:MERC), Altimmune, Inc. (NASDAQ:ALT), Cambium Networks Corporation (NASDAQ:CMBM), Byline Bancorp, Inc. (NYSE:BY), McEwen Mining Inc (NYSE:MUX), Establishment Labs Holdings Inc. (NASDAQ:ESTA), and QCR Holdings, Inc. (NASDAQ:QCRH). This group of stocks’ market caps are similar to AEGN’s market cap.
|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 11 hedge funds with bullish positions and the average amount invested in these stocks was $52 million. That figure was $14 million in AEGN’s case. Altimmune, Inc. (NASDAQ:ALT) is the most popular stock in this table. On the other hand Cambium Networks Corporation (NASDAQ:CMBM) is the least popular one with only 6 bullish hedge fund positions. Aegion Corp (NASDAQ:AEGN) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for AEGN is 33.4. 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. A small number of hedge funds were also right about betting on AEGN as the stock returned 37.6% since the end of the third quarter (through 12/8) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.