Is AGNC A Good Stock To Buy According To Hedge Funds?

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.

Is AGNC a good stock to buy? AGNC Investment Corp. (NASDAQ:AGNC) shareholders have witnessed a decrease in support from the world’s most elite money managers in recent months. AGNC Investment Corp. (NASDAQ:AGNC) was in 32 hedge funds’ portfolios at the end of September. The all time high for this statistic is 37. Our calculations also showed that AGNC 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).

Video: Watch our video about the top 5 most popular hedge fund stocks.

If you’d ask most market participants, hedge funds are viewed as unimportant, outdated investment tools of years past. While there are more than 8000 funds trading today, Our researchers hone in on the crème de la crème of this club, approximately 850 funds. These money managers command the majority of all hedge funds’ total asset base, and by tailing their unrivaled stock picks, Insider Monkey has identified various investment strategies that have historically beaten the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 13% since February 2017 (through November 17th) even though the market was up 65% during the same period. We just shared a list of 6 short targets in our latest quarterly update .


Louis Bacon Moore of Moore Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy 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. Keeping this in mind let’s go over the latest hedge fund action surrounding AGNC Investment Corp. (NASDAQ:AGNC).

Do Hedge Funds Think AGNC Is A Good Stock To Buy Now?

At the end of September, a total of 32 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -14% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards AGNC over the last 21 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is AGNC A Good Stock To Buy?

The largest stake in AGNC Investment Corp. (NASDAQ:AGNC) was held by D E Shaw, which reported holding $60.7 million worth of stock at the end of September. It was followed by OZ Management with a $51.5 million position. Other investors bullish on the company included Moore Global Investments, Clough Capital Partners, and Millennium Management. In terms of the portfolio weights assigned to each position One Fin Capital Management allocated the biggest weight to AGNC Investment Corp. (NASDAQ:AGNC), around 4.9% of its 13F portfolio. Clough Capital Partners is also relatively very bullish on the stock, dishing out 2.45 percent of its 13F equity portfolio to AGNC.

Due to the fact that AGNC Investment Corp. (NASDAQ:AGNC) has experienced falling interest from hedge fund managers, it’s easy to see that there is a sect of hedgies who sold off their full holdings last quarter. At the top of the heap, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital dropped the largest position of the “upper crust” of funds monitored by Insider Monkey, valued at an estimated $38.9 million in stock. Paul Marshall and Ian Wace’s fund, Marshall Wace LLP, also sold off its stock, about $22.4 million worth. These transactions are interesting, as total hedge fund interest was cut by 5 funds last quarter.

Let’s check out 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 Iron Mountain Incorporated (NYSE:IRM), Magellan Midstream Partners, L.P. (NYSE:MMP), Amedisys Inc (NASDAQ:AMED), Mylan Inc. (NASDAQ:MYL), Chemed Corporation (NYSE:CHE), Banco de Chile (NYSE:BCH), and Amdocs Limited (NYSE:DOX). This group of stocks’ market valuations resemble AGNC’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
IRM 25 112125 3
MMP 20 101183 5
AMED 31 343564 1
MYL 48 1749763 2
CHE 34 417170 8
BCH 4 34650 1
DOX 29 390241 2
Average 27.3 449814 3.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 27.3 hedge funds with bullish positions and the average amount invested in these stocks was $450 million. That figure was $382 million in AGNC’s case. Mylan Inc. (NASDAQ:MYL) is the most popular stock in this table. On the other hand Banco de Chile (NYSE:BCH) is the least popular one with only 4 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 overall hedge fund sentiment score for AGNC is 57.8. 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 33.3% in 2020 through December 18th and still beat the market by 16.4 percentage points. Hedge funds were also right about betting on AGNC as the stock returned 12.7% since the end of Q3 (through 12/18) 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.