Is ATO Stock A Buy or Sell?

Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don’t make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards Atmos Energy Corporation (NYSE:ATO) to find out whether there were any major changes in hedge funds’ views.

Is ATO stock a buy? Atmos Energy Corporation (NYSE:ATO) investors should be aware of an increase in hedge fund interest of late. Atmos Energy Corporation (NYSE:ATO) was in 25 hedge funds’ portfolios at the end of December. The all time high for this statistic is 26. There were 18 hedge funds in our database with ATO positions at the end of the third quarter. Our calculations also showed that ATO isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

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

At the end of the fourth quarter, a total of 25 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 39% from one quarter earlier. By comparison, 26 hedge funds held shares or bullish call options in ATO a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, AQR Capital Management held the most valuable stake in Atmos Energy Corporation (NYSE:ATO), which was worth $56.3 million at the end of the fourth quarter. On the second spot was Millennium Management which amassed $52.7 million worth of shares. Zimmer Partners, Citadel Investment Group, 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 Coann Capital allocated the biggest weight to Atmos Energy Corporation (NYSE:ATO), around 9.42% of its 13F portfolio. CSat Investment Advisory is also relatively very bullish on the stock, earmarking 0.77 percent of its 13F equity portfolio to ATO.

With a general bullishness amongst the heavyweights, key money managers were breaking ground themselves. Zimmer Partners, managed by Stuart J. Zimmer, assembled the most valuable position in Atmos Energy Corporation (NYSE:ATO). Zimmer Partners had $47.7 million invested in the company at the end of the quarter. Matthew Davis’s Coann Capital also initiated a $10.4 million position during the quarter. The other funds with new positions in the stock are Steve Cohen’s Point72 Asset Management, Michael Gelband’s ExodusPoint Capital, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.

Let’s check out hedge fund activity in other stocks similar to Atmos Energy Corporation (NYSE:ATO). We will take a look at Booz Allen Hamilton Holding Corporation (NYSE:BAH), PPD, Inc. (NASDAQ:PPD), IPG Photonics Corporation (NASDAQ:IPGP), Sibanye Stillwater Limited (NYSE:SBSW), Fortune Brands Home & Security Inc (NYSE:FBHS), InterContinental Hotels Group PLC (NYSE:IHG), and Autohome Inc (NYSE:ATHM). This group of stocks’ market caps are closest to ATO’s market cap.

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As you can see these stocks had an average of 21.6 hedge funds with bullish positions and the average amount invested in these stocks was $412 million. That figure was $275 million in ATO’s case. Fortune Brands Home & Security Inc (NYSE:FBHS) is the most popular stock in this table. On the other hand InterContinental Hotels Group PLC (NYSE:IHG) is the least popular one with only 7 bullish hedge fund positions. Atmos Energy Corporation (NYSE:ATO) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ATO is 78. 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. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.3% in 2021 through April 19th and beat the market again by 0.9 percentage points. Unfortunately ATO wasn’t nearly as popular as these 30 stocks and hedge funds that were betting on ATO were disappointed as the stock returned 7.4% since the end of December (through 4/19) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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