Should You Buy Avangrid, Inc. (AGR)?

The Insider Monkey team has completed processing the quarterly 13F filings for the September quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Avangrid, Inc. (NYSE:AGR).

Avangrid, Inc. (NYSE:AGR) shareholders have witnessed an increase in activity from the world’s largest hedge funds lately. AGR was in 14 hedge funds’ portfolios at the end of the third quarter of 2019. There were 12 hedge funds in our database with AGR positions at the end of the previous quarter. 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 below for Q2 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to 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 hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Richard Pzena - Pzena Investment Management

Richard S. Pzena of Pzena Investment Management

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. Let’s review the new hedge fund action regarding Avangrid, Inc. (NYSE:AGR).

What have hedge funds been doing with Avangrid, Inc. (NYSE:AGR)?

At the end of the third quarter, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 17% from the second quarter of 2019. On the other hand, there were a total of 18 hedge funds with a bullish position in AGR a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is AGR A Good Stock To Buy?

More specifically, Pzena Investment Management was the largest shareholder of Avangrid, Inc. (NYSE:AGR), with a stake worth $114.5 million reported as of the end of September. Trailing Pzena Investment Management was Electron Capital Partners, which amassed a stake valued at $78 million. Renaissance Technologies, D E Shaw, and Covalis Capital 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 Covalis Capital allocated the biggest weight to Avangrid, Inc. (NYSE:AGR), around 29.21% of its 13F portfolio. Electron Capital Partners is also relatively very bullish on the stock, dishing out 11.42 percent of its 13F equity portfolio to AGR.

As aggregate interest increased, specific money managers have jumped into Avangrid, Inc. (NYSE:AGR) headfirst. Citadel Investment Group, managed by Ken Griffin, established the most outsized position in Avangrid, Inc. (NYSE:AGR). Citadel Investment Group had $11.5 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also made a $0.8 million investment in the stock during the quarter. The only other fund with a new position in the stock is Ken Griffin’s Citadel Investment Group.

Let’s check out hedge fund activity in other stocks similar to Avangrid, Inc. (NYSE:AGR). We will take a look at Garmin Ltd. (NASDAQ:GRMN), Incyte Corporation (NASDAQ:INCY), Principal Financial Group Inc (NYSE:PFG), and Invitation Homes Inc. (NYSE:INVH). All of these stocks’ market caps resemble AGR’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
GRMN 26 504128 -6
INCY 32 3214518 -4
PFG 19 98613 2
INVH 28 1096604 -3
Average 26.25 1228466 -2.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 26.25 hedge funds with bullish positions and the average amount invested in these stocks was $1228 million. That figure was $362 million in AGR’s case. Incyte Corporation (NASDAQ:INCY) is the most popular stock in this table. On the other hand Principal Financial Group Inc (NYSE:PFG) is the least popular one with only 19 bullish hedge fund positions. Compared to these stocks Avangrid, Inc. (NYSE:AGR) is even less popular than PFG. 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 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 -7.1% during the fourth quarter (through the end of November) 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 70 percent of these stocks already outperformed the market so far in Q4.

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