AFLAC Incorporated (AFL): Are Hedge Funds Right About This Stock?

Between June 25 and October 30th the Russell 2000 ETF (IWM) lagged the larger S&P 500 ETF (SPY) by more than 14 percentage points as investors worried over the possible ramifications of rising interest rates. The hedge funds and institutional investors we track typically invest more in smaller-cap stocks than an average investor, and we have seen data that shows those funds paring back their overall exposure. Those funds cutting positions in small-caps is one reason why volatility has increased. In the following paragraphs, we take a closer look at what hedge funds and prominent investors think of AFLAC Incorporated (NYSE:AFL) and see how the stock is affected by the recent hedge fund activity.

Is AFLAC Incorporated (NYSE:AFL) a sound stock to buy now? Investors who are in the know are in an optimistic mood. The number of long hedge fund bets went up by 1 recently. AFLAC Incorporated (NYSE:AFL) was in 28 hedge funds’ portfolios at the end of the third quarter of 2015. There were 27 hedge funds in our database with AFLAC Incorporated (NYSE:AFL) positions at the end of the previous quarter. At the end of this article, we will also compare AFLAC Incorporated (NYSE:AFL) to other stocks, including Nokia Corporation (ADR) (NYSE:NOK), O’Reilly Automotive Inc (NASDAQ:ORLY), and Marathon Petroleum Corp (NYSE:MPC) to get a better sense of its popularity.

To most investors, hedge funds are assumed to be worthless, outdated investment tools of yesteryear. While there are greater than 8000 funds in operation today, Our experts hone in on the masters of this group, approximately 700 funds. These hedge fund managers manage the lion’s share of the smart money’s total asset base, and by monitoring their unrivaled equity investments, Insider Monkey has determined several investment strategies that have historically defeated the broader indices. Insider Monkey’s small-cap hedge fund strategy surpassed the S&P 500 index by 12 percentage points per annum for a decade in their back tests.

With all of this in mind, we’re going to analyze the recent action encompassing AFLAC Incorporated (NYSE:AFL).

How have hedgies been trading AFLAC Incorporated (NYSE:AFL)?

Heading into Q4, a total of 28 of the hedge funds tracked by Insider Monkey held long positions in this stock, an increase of 4% from the second quarter. With hedge funds’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).

According to the publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Citadel Investment Group, managed by Ken Griffin, holds the largest position in AFLAC Incorporated (NYSE:AFL). Citadel Investment Group has a $175.1 million position in the stock, comprising 0.2% of its 13F portfolio. Sitting at the No. 2 spot is AQR Capital Management, managed by Cliff Asness, which holds a $99.1 million position; 0.2% of its 13F portfolio is allocated to the stock. Other members of the smart money that are bullish encompass William B. Gray’s Orbis Investment Management, David Harding’s Winton Capital Management and Daniel Bubis’ Tetrem Capital Management.

Now, key money managers have jumped into AFLAC Incorporated (NYSE:AFL) headfirst. BlueCrest Capital Mgmt., managed by Michael Platt and William Reeves, created the most outsized position in AFLAC Incorporated (NYSE:AFL). BlueCrest Capital Mgmt. had $5.1 million invested in the company at the end of the quarter. Lawrence Sapanski’s Scoria Capital also initiated a $3.6 million position during the quarter. The following funds were also among the new AFL investors: Wilfred Meckel’s Marque Millennium Capital, Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners, and Roger Ibbotson’s Zebra Capital Management.

Let’s now review hedge fund activity in other stocks similar to AFLAC Incorporated (NYSE:AFL). These stocks are Nokia Corporation (ADR) (NYSE:NOK), O’Reilly Automotive Inc (NASDAQ:ORLY), Marathon Petroleum Corp (NYSE:MPC), and Aon PLC (NYSE:AON). All of these stocks’ market caps are similar to AFLAC Incorporated (NYSE:AFL)’s market cap.

As you can see, these stocks had an average of 35 hedge funds with bullish positions and the average amount invested in these stocks was $1.96 billion. That figure was $769 million in AFLAC Incorporated (NYSE:AFL)’s case. Out of these stocks, Marathon Petroleum Corp (NYSE:MPC) and Nokia Corporation (ADR) (NYSE:NOK) were at the different ends of the ladder, with Marathon Petroleum Corp (NYSE:MPC) being the first and Nokia Corporation (ADR) (NYSE:NOK) being the last. AFLAC Incorporated (NYSE:AFL) is not the least popular stock in this group, but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard, Marathon Petroleum Corp (NYSE:MPC) might be a better candidate to consider a long position.