World-class money managers like Ken Griffin and Barry Rosenstein only invest their wealthy clients’ money after undertaking a rigorous examination of any potential stock. They are particularly successful in this regard when it comes to small-cap stocks, which their peerless research gives them a big information advantage on when it comes to judging their worth. It’s not surprising then that they generate their biggest returns from these stocks and invest more of their money in these stocks on average than other investors. It’s also not surprising then that we pay close attention to these picks ourselves and have built a market-beating investment strategy around them.
American Financial Group, Inc. (NYSE:AFG) was in 24 hedge funds’ portfolios at the end of September. AFG has seen an increase in hedge fund interest recently. There were 17 hedge funds in our database with AFG positions at the end of the previous quarter. Our calculations also showed that AFG isn’t among the 30 most popular stocks among hedge funds.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 6.3% year to date (through December 3rd) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 18 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
We’re going to check out the key hedge fund action surrounding American Financial Group, Inc. (NYSE:AFG).
Hedge fund activity in American Financial Group, Inc. (NYSE:AFG)
At the end of the third quarter, a total of 24 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 41% from the previous quarter. By comparison, 19 hedge funds held shares or bullish call options in AFG heading into this year. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, AQR Capital Management, managed by Cliff Asness, holds the largest position in American Financial Group, Inc. (NYSE:AFG). AQR Capital Management has a $164.5 million position in the stock, comprising 0.2% of its 13F portfolio. On AQR Capital Management’s heels is Renaissance Technologies, managed by Jim Simons, which holds a $62.6 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Some other peers that hold long positions comprise Daniel Johnson’s Gillson Capital, Israel Englander’s Millennium Management and Noam Gottesman’s GLG Partners.
Consequently, key hedge funds were leading the bulls’ herd. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, assembled the most outsized position in American Financial Group, Inc. (NYSE:AFG). Arrowstreet Capital had $12.4 million invested in the company at the end of the quarter. Gregg Moskowitz’s Interval Partners also made a $7 million investment in the stock during the quarter. The other funds with new positions in the stock are D. E. Shaw’s D E Shaw and Frederick DiSanto’s Ancora Advisors.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as American Financial Group, Inc. (NYSE:AFG) but similarly valued. These stocks are Iron Mountain Incorporated (NYSE:IRM), Huaneng Power International Inc (NYSE:HNP), Nielsen Holdings plc (NYSE:NLSN), and Spirit AeroSystems Holdings, Inc. (NYSE:SPR). All of these stocks’ market caps resemble AFG’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| IRM | 20 | 107350 | 6 |
| HNP | 4 | 1992 | -1 |
| NLSN | 35 | 1088943 | 14 |
| SPR | 32 | 2730557 | 2 |
| Average | 22.75 | 982211 | 5.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.75 hedge funds with bullish positions and the average amount invested in these stocks was $982 million. That figure was $334 million in AFG’s case. Nielsen Holdings plc (NYSE:NLSN) is the most popular stock in this table. On the other hand Huaneng Power International Inc (NYSE:HNP) is the least popular one with only 4 bullish hedge fund positions. American Financial Group, Inc. (NYSE:AFG) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard NLSN might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
