We are still in an overall bull market and many stocks that smart money investors were piling into surged in 2019. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 57% each. Hedge funds’ top 3 stock picks returned 45.7% last year and beat the S&P 500 ETFs by more than 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Axis Capital Holdings Limited (NYSE:AXS).
Axis Capital Holdings Limited (NYSE:AXS) investors should be aware of an increase in activity from the world’s largest hedge funds lately. Our calculations also showed that AXS isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 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’ 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.
Noam Gottesman of GLG Partners
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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock is still extremely cheap despite already gaining 20 percent. With all of this in mind let’s check out the fresh hedge fund action regarding Axis Capital Holdings Limited (NYSE:AXS).
What have hedge funds been doing with Axis Capital Holdings Limited (NYSE:AXS)?
Heading into the fourth quarter of 2019, a total of 28 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 4% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards AXS over the last 17 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Pzena Investment Management held the most valuable stake in Axis Capital Holdings Limited (NYSE:AXS), which was worth $293.9 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $180.6 million worth of shares. AQR Capital Management, Samlyn Capital, and GLG Partners 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 Strycker View Capital allocated the biggest weight to Axis Capital Holdings Limited (NYSE:AXS), around 5.93% of its 13F portfolio. BlueMar Capital Management is also relatively very bullish on the stock, earmarking 3.53 percent of its 13F equity portfolio to AXS.
With a general bullishness amongst the heavyweights, key money managers have jumped into Axis Capital Holdings Limited (NYSE:AXS) headfirst. Winton Capital Management, managed by David Harding, assembled the most outsized position in Axis Capital Holdings Limited (NYSE:AXS). Winton Capital Management had $17.3 million invested in the company at the end of the quarter. Usman Waheed’s Strycker View Capital also made a $14.9 million investment in the stock during the quarter. The other funds with new positions in the stock are Matthew Hulsizer’s PEAK6 Capital Management, Mike Vranos’s Ellington, and Paul Marshall and Ian Wace’s Marshall Wace.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Axis Capital Holdings Limited (NYSE:AXS) but similarly valued. These stocks are Sarepta Therapeutics Inc (NASDAQ:SRPT), World Wrestling Entertainment, Inc. (NYSE:WWE), The Howard Hughes Corporation (NYSE:HHC), and IAA, Inc. (NYSE:IAA). All of these stocks’ market caps are closest to AXS’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SRPT | 33 | 801161 | -15 |
| WWE | 34 | 1203910 | -5 |
| HHC | 25 | 527177 | -1 |
| IAA | 31 | 758086 | -11 |
| Average | 30.75 | 822584 | -8 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 30.75 hedge funds with bullish positions and the average amount invested in these stocks was $823 million. That figure was $893 million in AXS’s case. World Wrestling Entertainment, Inc. (NYSE:WWE) is the most popular stock in this table. On the other hand The Howard Hughes Corporation (NYSE:HHC) is the least popular one with only 25 bullish hedge fund positions. Axis Capital Holdings Limited (NYSE:AXS) 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Unfortunately AXS wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); AXS investors were disappointed as the stock returned 18.3% in 2019 and trailed 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 65 percent of these stocks already outperformed the market in 2019.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
