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Is Algonquin Power & Utilities Corp. (AQN) A Good Stock To Buy?

At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Algonquin Power & Utilities Corp. (NYSE:AQN).

Algonquin Power & Utilities Corp. (NYSE:AQN) investors should be aware of an increase in support from the world’s most elite money managers recently. Our calculations also showed that AQN 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.

In the eyes of most shareholders, hedge funds are perceived as slow, old investment vehicles of years past. While there are more than 8000 funds in operation at present, We hone in on the masters of this club, around 850 funds. These hedge fund managers command most of the smart money’s total asset base, and by tracking their finest equity investments, Insider Monkey has uncovered a number of investment strategies that have historically exceeded the market. Insider Monkey’s flagship short hedge fund strategy exceeded the S&P 500 short ETFs by around 20 percentage points per annum 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 .

Rajiv Jain of GQG Partners

Rajiv Jain of GQG Partners

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, we take a look at lists like the 10 free email services without phone verification to identify emerging trends that are likely to lead to 1000% gains in the coming years. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s take a look at the fresh hedge fund action regarding Algonquin Power & Utilities Corp. (NYSE:AQN).

What does smart money think about Algonquin Power & Utilities Corp. (NYSE:AQN)?

At Q1’s end, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 8% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards AQN over the last 18 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, GQG Partners was the largest shareholder of Algonquin Power & Utilities Corp. (NYSE:AQN), with a stake worth $105.5 million reported as of the end of September. Trailing GQG Partners was Renaissance Technologies, which amassed a stake valued at $56 million. Adage Capital Management, Zimmer Partners, and Two Sigma Advisors 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 Algonquin Power & Utilities Corp. (NYSE:AQN), around 6.04% of its 13F portfolio. Heronetta Management is also relatively very bullish on the stock, dishing out 5.31 percent of its 13F equity portfolio to AQN.

Now, some big names were leading the bulls’ herd. Zimmer Partners, managed by Stuart J. Zimmer, assembled the biggest position in Algonquin Power & Utilities Corp. (NYSE:AQN). Zimmer Partners had $13.5 million invested in the company at the end of the quarter. Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors also made a $1 million investment in the stock during the quarter. The other funds with brand new AQN positions are Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and Paul Marshall and Ian Wace’s Marshall Wace LLP.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Algonquin Power & Utilities Corp. (NYSE:AQN) but similarly valued. We will take a look at Lennox International Inc. (NYSE:LII), Arconic Corporation (NYSE:ARNC), Carlisle Companies, Inc. (NYSE:CSL), and American Homes 4 Rent (NYSE:AMH). All of these stocks’ market caps match AQN’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
LII 21 169377 -11
ARNC 25 1740220 -18
CSL 23 262658 -3
AMH 21 177852 -2
Average 22.5 587527 -8.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 22.5 hedge funds with bullish positions and the average amount invested in these stocks was $588 million. That figure was $254 million in AQN’s case. Arconic Corporation (NYSE:ARNC) is the most popular stock in this table. On the other hand Lennox International Inc. (NYSE:LII) is the least popular one with only 21 bullish hedge fund positions. Compared to these stocks Algonquin Power & Utilities Corp. (NYSE:AQN) is even less popular than LII. Hedge funds dodged a bullet by taking a bearish stance towards AQN. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.3% in 2020 through June 25th but managed to beat the market by 16.8 percentage points. Unfortunately AQN wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); AQN investors were disappointed as the stock returned -2.5% during the second quarter (through June 25th) 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 most of these stocks already outperformed the market so far in 2020.

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