Were Hedge Funds Right About Piling Into American Express Company (AXP)?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 887 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of December 31st, 2020. What do these smart investors think about American Express Company (NYSE:AXP)?

Is American Express Company (NYSE:AXP) ready to rally soon? The best stock pickers were turning bullish. The number of bullish hedge fund positions rose by 12 in recent months. American Express Company (NYSE:AXP) was in 60 hedge funds’ portfolios at the end of December. The all time high for this statistic was previously 58. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that AXP isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

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 has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 124 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

Andreas Halvorsen Andreas Halvorsen of Viking Global

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best hydrogen fuel cell stocks to pick the next Tesla that will deliver a 10x return. 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. With all of this in mind let’s take a gander at the recent hedge fund action encompassing American Express Company (NYSE:AXP).

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

At the end of December, a total of 60 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 25% from the third quarter of 2020. By comparison, 58 hedge funds held shares or bullish call options in AXP a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is AXP A Good Stock To Buy?

When looking at the institutional investors followed by Insider Monkey, Warren Buffett’s Berkshire Hathaway has the most valuable position in American Express Company (NYSE:AXP), worth close to $18.3312 billion, amounting to 6.8% of its total 13F portfolio. Sitting at the No. 2 spot is Ken Fisher of Fisher Asset Management, with a $1.8115 billion position; 1.4% of its 13F portfolio is allocated to the stock. Remaining professional money managers with similar optimism comprise Andreas Halvorsen’s Viking Global, Eashwar Krishnan’s Tybourne Capital Management and Mario Gabelli’s GAMCO Investors. In terms of the portfolio weights assigned to each position Aquamarine Capital Management allocated the biggest weight to American Express Company (NYSE:AXP), around 14.81% of its 13F portfolio. Hi-Line Capital Management is also relatively very bullish on the stock, setting aside 7.57 percent of its 13F equity portfolio to AXP.

With a general bullishness amongst the heavyweights, some big names have jumped into American Express Company (NYSE:AXP) headfirst. Theleme Partners, managed by Patrick Degorce, assembled the most outsized position in American Express Company (NYSE:AXP). Theleme Partners had $110.9 million invested in the company at the end of the quarter. James Parsons’s Junto Capital Management also initiated a $31.9 million position during the quarter. The other funds with brand new AXP positions are Peter Seuss’s Prana Capital Management, Dipak Patel’s Alight Capital, and Leonard Green’s Leonard Green & Partners.

Let’s also examine hedge fund activity in other stocks similar to American Express Company (NYSE:AXP). These stocks are Zoom Video Communications, Inc. (NASDAQ:ZM), The Estee Lauder Companies Inc (NYSE:EL), Intuitive Surgical, Inc. (NASDAQ:ISRG), General Electric Company (NYSE:GE), Rio Tinto Group (NYSE:RIO), Diageo plc (NYSE:DEO), and GlaxoSmithKline plc (NYSE:GSK). This group of stocks’ market caps are similar to AXP’s market cap.

[table]
Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position
ZM,59,6002261,3
EL,51,3593398,5
ISRG,49,1802145,-1
GE,69,5684620,24
RIO,26,1711997,3
DEO,23,667041,4
GSK,30,1742036,-1
Average,43.9,3029071,5.3
[/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 43.9 hedge funds with bullish positions and the average amount invested in these stocks was $3029 million. That figure was $21887 million in AXP’s case. General Electric Company (NYSE:GE) is the most popular stock in this table. On the other hand Diageo plc (NYSE:DEO) is the least popular one with only 23 bullish hedge fund positions. American Express Company (NYSE:AXP) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for AXP is 80.2. 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 10 most popular stocks among hedge funds returned 90.7% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 35 percentage points. These stocks gained 13.6% in 2021 through April 30th and still beat the market by 1.6 percentage points. Hedge funds were also right about betting on AXP as the stock returned 27.7% since the end of Q4 (through 4/30) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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


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