While the market driven by short-term sentiment influenced by the accomodative interest rate environment in the US, virus news and stimulus talks, many smart money investors are starting to get cautious towards the current bull run since March and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 30,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Avangrid, Inc. (NYSE:AGR).
Is AGR a good stock to buy now? Avangrid, Inc. (NYSE:AGR) has experienced a decrease in hedge fund interest lately. Avangrid, Inc. (NYSE:AGR) was in 11 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 20. Our calculations also showed that AGR 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.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 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. Keeping this in mind let’s check out the fresh hedge fund action encompassing Avangrid, Inc. (NYSE:AGR).
Do Hedge Funds Think AGR Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -39% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards AGR over the last 21 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).
More specifically, GAMCO Investors was the largest shareholder of Avangrid, Inc. (NYSE:AGR), with a stake worth $19.5 million reported as of the end of September. Trailing GAMCO Investors was Millennium Management, which amassed a stake valued at $4.7 million. AQR Capital Management, GLG Partners, and Marshall Wace LLP 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 GAMCO Investors allocated the biggest weight to Avangrid, Inc. (NYSE:AGR), around 0.22% of its 13F portfolio. ExodusPoint Capital is also relatively very bullish on the stock, earmarking 0.02 percent of its 13F equity portfolio to AGR.
Seeing as Avangrid, Inc. (NYSE:AGR) has experienced a decline in interest from hedge fund managers, it’s safe to say that there were a few hedgies that elected to cut their entire stakes in the third quarter. Intriguingly, Richard S. Pzena’s Pzena Investment Management sold off the largest position of the 750 funds followed by Insider Monkey, comprising close to $70.1 million in stock, and Ken Griffin’s Citadel Investment Group was right behind this move, as the fund dropped about $14.7 million worth. These moves are important to note, as total hedge fund interest dropped by 7 funds in the third quarter.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Avangrid, Inc. (NYSE:AGR) but similarly valued. These stocks are SS&C Technologies Holdings, Inc. (NASDAQ:SSNC), FirstEnergy Corp. (NYSE:FE), Insulet Corporation (NASDAQ:PODD), Etsy Inc (NASDAQ:ETSY), Quest Diagnostics Incorporated (NYSE:DGX), Slack Technologies Inc (NYSE:WORK), and EXACT Sciences Corporation (NASDAQ:EXAS). This group of stocks’ market valuations are closest to AGR’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 42.6 hedge funds with bullish positions and the average amount invested in these stocks was $1192 million. That figure was $35 million in AGR’s case. FirstEnergy Corp. (NYSE:FE) is the most popular stock in this table. On the other hand Slack Technologies Inc (NYSE:WORK) is the least popular one with only 20 bullish hedge fund positions. Compared to these stocks Avangrid, Inc. (NYSE:AGR) is even less popular than WORK. Our overall hedge fund sentiment score for AGR is 14.5. 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. Hedge funds dodged a bullet by taking a bearish stance towards AGR. Our calculations showed that the top 20 most popular hedge fund stocks 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 but managed to beat the market again by 16.2 percentage points. Unfortunately AGR wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); AGR investors were disappointed as the stock returned -8.5% since the end of the third quarter (through 12/8) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in 2020.
Disclosure: None. This article was originally published at Insider Monkey.