Hedge Funds Have Never Been This Bullish On The AES Corporation (AES)

·6 min read

Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren't timid and registered double digit market beating gains. Financials, energy and industrial stocks initially suffered the most but many of these stocks delivered strong returns since November and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment towards The AES Corporation (NYSE:AES) changed recently.

Is The AES Corporation (NYSE:AES) an attractive investment right now? Investors who are in the know were in an optimistic mood. The number of long hedge fund bets advanced by 13 in recent months. The AES Corporation (NYSE:AES) was in 51 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic was 38. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that AES isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 38 hedge funds in our database with AES holdings at the end of December.

In the eyes of most traders, hedge funds are assumed to be worthless, old investment vehicles of yesteryear. While there are over 8000 funds trading today, We look at the aristocrats of this club, about 850 funds. It is estimated that this group of investors direct most of the hedge fund industry's total capital, and by following their first-class picks, Insider Monkey has determined many investment strategies that have historically outperformed the broader indices. Insider Monkey's flagship short hedge fund strategy outrun the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Also, our monthly newsletter's portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .


Jeffrey Ubben of ValueAct Capital

At Insider Monkey we leave no stone unturned when looking for 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, which is why we are checking out this inflation play. We go through lists like 10 best gold stocks to buy to identify promising stocks. 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 homepage. Keeping this in mind let's take a look at the recent hedge fund action encompassing The AES Corporation (NYSE:AES).

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

At the end of March, a total of 51 of the hedge funds tracked by Insider Monkey were long this stock, a change of 34% from the fourth quarter of 2020. The graph below displays the number of hedge funds with bullish position in AES over the last 23 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, Orbis Investment Management, managed by William B. Gray, holds the largest position in The AES Corporation (NYSE:AES). Orbis Investment Management has a $207.6 million position in the stock, comprising 1.5% of its 13F portfolio. Coming in second is Electron Capital Partners, managed by Jos Shaver, which holds a $198.1 million position; the fund has 13.7% of its 13F portfolio invested in the stock. Remaining professional money managers that hold long positions include John Smith Clark's Southpoint Capital Advisors, Jeff Ubben's Inclusive Capital and Israel Englander's Millennium Management. In terms of the portfolio weights assigned to each position Electron Capital Partners allocated the biggest weight to The AES Corporation (NYSE:AES), around 13.71% of its 13F portfolio. Inclusive Capital is also relatively very bullish on the stock, setting aside 10.65 percent of its 13F equity portfolio to AES.

With a general bullishness amongst the heavyweights, key money managers were breaking ground themselves. Point State Capital, managed by Zach Schreiber, created the most valuable position in The AES Corporation (NYSE:AES). Point State Capital had $58.4 million invested in the company at the end of the quarter. Dan Loeb's Third Point also made a $51.7 million investment in the stock during the quarter. The following funds were also among the new AES investors: Dan Loeb's Third Point, Stuart J. Zimmer's Zimmer Partners, and Frank Fu's CaaS Capital.

Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as The AES Corporation (NYSE:AES) but similarly valued. These stocks are Incyte Corporation (NASDAQ:INCY), Cardinal Health, Inc. (NYSE:CAH), Huazhu Group Limited (NASDAQ:HTHT), J.B. Hunt Transport Services, Inc. (NASDAQ:JBHT), Imperial Oil Limited (NYSE:IMO), Broadridge Financial Solutions, Inc. (NYSE:BR), and Seagate Technology Holdings plc (NASDAQ:STX). This group of stocks' market caps are closest to AES's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position INCY,32,3851519,-5 CAH,39,967855,-10 HTHT,27,687842,4 JBHT,22,339245,-4 IMO,13,65541,5 BR,22,233035,-3 STX,27,1970595,-3 Average,26,1159376,-2.3 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 26 hedge funds with bullish positions and the average amount invested in these stocks was $1159 million. That figure was $1542 million in AES's case. Cardinal Health, Inc. (NYSE:CAH) is the most popular stock in this table. On the other hand Imperial Oil Limited (NYSE:IMO) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks The AES Corporation (NYSE:AES) is more popular among hedge funds. Our overall hedge fund sentiment score for AES is 90. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 17.4% in 2021 through June 18th and still beat the market by 6.1 percentage points. Unfortunately AES wasn't nearly as popular as these 5 stocks and hedge funds that were betting on AES were disappointed as the stock returned -5.7% since the end of the first quarter (through 6/18) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.

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

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