Billionaires Are Betting on These Five Insurers

Whether times are good or bad, insurance is needed most of the time. Yet stocks of insurance companies tend to fluctuate wildly over time. The main reason behind this phenomenon is that insurance companies don’t just sit on the pile of money they receive from their clients; rather they invest them. So, the fluctuation of the stock is mainly a reflection of the returns generated by the investments made by these companies. In this article we’ll take a look at five insurance stocks that are most popular among top hedge funds.

Through extensive research, we determined that imitating some of the picks of hedge funds and other institutional investors can help generate market-beating returns over the long run. The key is to focus on the small-cap picks of these investors, since they are usually less followed by the broader market and are less price-efficient. Our backtests that covered the period between 1999 and 2012, showed that following the 15 most popular small-caps among hedge funds can help a retail investor beat the market by an average of 95 basis points per month (see more details here).

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AIG Is Still Hot

One of the most popular stocks among the funds tracked by us, American International Group Inc (NYSE:AIG) could be found in the portfolio of 94 of the funds followed by Insider Monkey at the end of the first quarter, down from 101 a quarter before. Although hedge fund interest cooled down a bit, Carl Icahn is still bullish on the insurance giant and has increased his fund’s holding by 6% during the quarter. As reported in its latest 13F filing, Icahn Capital holds 44.4 million shares valued at more than $2.4 billion. Billionaire John Paulson is also betting big on American International Group Inc (NYSE:AIG), as his fund held 11.2 million shares at the end of March. Icahn has teamed up with Paulson to push for an AIG split up. Both investors have made peace with the management of the company for now, in exchange for two board seats, but have not given up on the idea of breaking up the company into three separate entities. The stock has had a lousy performance so far this year, failing to recover from the initial sell-off. American International Group Inc (NYSE:AIG) is mainly recommended as a ‘Buy’ with a consensus price target of $65.5 per share.

Allstate Is The New Darling

Hedge fund interest in Allstate Corp (NYSE:ALL) went through the roof during the first quarter, with the number of long positions registered at the end of March surging to 40 from 28 at the end of December. Cliff Asness‘ fund, AQR Capital Management, holds the largest stake in Allstate Corp (NYSE:ALL) among the funds in our database, having reported ownership of 4.92 million shares valued at $332 million. Arrowstreet Capital, run by Peter Rathjens, Bruce Clarke And John Campbell, reported a fresh stake in the company that amounted to 724,260 shares worth $48.8 million according to its latest 13F filing. During the first quarter, Allstate Corp (NYSE:ALL) was in a strong up trend, advancing by as much as 11% before settling into a trading range between $66 and $68 per share. For the first three months, the company posted a profit of $246 million or $0.84 per share when adjusted for one-time costs and $9.02 billion in revenue. Analysts, in turn, were looking for $0.75 per share on the back of $8.04 billion in revenues.

Three other insurance stocks are discussed on the next page, one of which hedge funds are not very fond of at the moment.

Progressive Corp (NYSE:PGR) is one of the stocks billionaire Andreas Halvorsen was very bullish on at the end of the first quarter. His fund reported a new position that amounted to 1.6 million shares worth $56.3 million at the end of March. Ric Dillon’s Diamond Hill Capital is also betting big on the stock, as it held 4.43 million shares valued at $155 million. In general, the popularity of Progressive Corp (NYSE:PGR) among top hedge funds has increased significantly during the quarter, with the number of long positions rising to 30 from 23 registered at the end of 2015. The company has a market cap of $18.7 billion and pays an annual dividend of $0.89 per share, which represents a yield of 2.80%. Progressive Corp (NYSE:PGR) is currently trading at a trailing Price to Earnings (P/E) ratio of 15, lower than the industry average of P/E of 19. Shares have ended yesterday’s trading session at $32.09 apiece, up by 2% for the year.

Fidelity National Financial Still Attractive Despited Mixed First Quarter

At the end of the first quarter, roughly 14% of FNF Group of Fidelity National Financial, Inc. (NYSE:FNF) common stock was held by 44 of the funds tracked by Insider Monkey, up from 40 three months earlier. Harris Associates, owned by Natixis Global Asset Management, established a huge new position in FNF Group of Fidelity National Financial, Inc. (NYSE:FNF), amassing more than 16 million shares worth $543 million, according to its latest 13F filing. The company posted mixed results for the first quarter, but that did not hurt the stock’s performance. FNF Group of Fidelity National Financial, Inc. (NYSE:FNF) posted revenues of $1.72 billion and adjusted earnings of $0.33 per share, while analysts had predicted $0.36 per share on the back of $1.69 billion in revenues. During the second quarter, Fidelity National’s stock gained more than 9%.

Interest In Chubb Is Falling

Chubb Ltd (NYSE:CB) is another insurance company that elite hedge fund shied away from during the first three months of 2016. According to our data, the number of long positions dropped to 40 at the end of March, from 50 registered a quarter before. Together, these funds held just 2.6% of the company’s common stock. There were, however, a number of funds that actually decided to buy the stock during the quarter. Dan Loeb‘s Third Point reported a fresh position in its latest 13F filing, that amounted to 2.4 million shares worth $286 million. Jim Simons’ Renaissance Technologies also bought 1.35 million shares of Chubb Ltd (NYSE:CB), a position valued at $160 million. Analysts recommend the stock mainly as a ‘Buy’ and the consensus price target is $128 per share, which represents an upside potential of just 2.8%. The stock is trading at a trailing P/E of 17, while analysts believe the multiple will drop to approximately 12 by the end of the fiscal year 2017, which means they expect a solid increase in Chubb Ltd (NYSE:CB)’s earnings.

Disclosure: none.