Legendary investors such as Leon Cooperman and Seth Klarman earn enormous amounts of money for themselves and their investors by doing in-depth research on small-cap stocks that big brokerage houses don’t publish. Small-cap stocks, especially when they are screened well, can generate substantial outperformance versus a boring index fund. That’s why we analyze the activity of those elite funds in these small-cap stocks. In the following paragraphs, we analyze Amtrust Financial Services, Inc. (NASDAQ:AFSI) from the perspective of those top investors.
Amtrust Financial Services, Inc. (NASDAQ:AFSI) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 20 hedge funds’ portfolios at the end of September. At the end of this article we will also compare AFSI to other stocks including Sirona Dental Systems, Inc. (NASDAQ:SIRO), ITC Holdings Corp. (NYSE:ITC), and Forest City Enterprises, Inc. (NYSE:FCE.A) to get a better sense of its popularity.
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According to most investors, hedge funds are viewed as worthless, outdated investment vehicles of years past. While there are greater than 8,000 funds with their doors open at the moment, our researchers choose to focus on the leaders of this group, about 700 funds. Most estimates calculate that this group of people command the lion’s share of the smart money’s total asset base, and by monitoring their unrivaled stock picks, Insider Monkey has determined a number of investment strategies that have historically defeated the S&P 500 index. Insider Monkey’s small-cap hedge fund strategy outstripped the S&P 500 index by 12 percentage points per year for a decade in their back tests.
With all of this in mind, let’s analyze the new action regarding Amtrust Financial Services, Inc. (NASDAQ:AFSI).
How are hedge funds trading Amtrust Financial Services, Inc. (NASDAQ:AFSI)?
Heading into Q4, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, unchanged from one quarter earlier. With hedge funds’ sentiment swirling, there exists a few key hedge fund managers who were boosting their holdings considerably (or had already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, White Elm Capital, managed by Matthew Iorio, holds the number one position in Amtrust Financial Services, Inc. (NASDAQ:AFSI). White Elm Capital has a $41.6 million position in the stock, comprising 4.3% of its 13F portfolio. Coming in second is Cliff Asness of AQR Capital Management, with a $23 million position; his fund has less than 0.1% of its 13F portfolio invested in the stock. Remaining members of the smart money with similar optimism encompass Israel Englander’s Millennium Management, Murray Stahl’s Horizon Asset Management, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.
Because Amtrust Financial Services, Inc. (NASDAQ:AFSI) has witnessed falling interest from the entirety of the hedge funds we track, it’s safe to say that there were a few funds who sold off their entire stakes heading into Q4. At the top of the heap, James Dinan’s York Capital Management sold off the largest stake of the “upper crust” of funds tracked by Insider Monkey, totaling about $103.2 million in stock, and D E Shaw was right behind this move, as the fund said goodbye to about $1.2 million worth of shares. These bearish behaviors are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Amtrust Financial Services, Inc. (NASDAQ:AFSI) but similarly valued. We will take a look at Sirona Dental Systems, Inc. (NASDAQ:SIRO), ITC Holdings Corp. (NYSE:ITC), Forest City Enterprises, Inc. (NYSE:FCE.A), and Old Dominion Freight Line (NASDAQ:ODFL). This group of stocks’ market values resemble AFSI’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SIRO | 19 | 697429 | 6 |
| ITC | 16 | 341245 | -3 |
| FCE.A | 37 | 1574082 | -1 |
| ODFL | 28 | 296426 | 1 |
As you can see these stocks had an average of 25 hedge funds with bullish positions and the average amount invested in these stocks was $727 million. That figure was $109 million in AFSI’s case. Forest City Enterprises, Inc. (NYSE:FCE.A) is the most popular stock in this table. On the other hand ITC Holdings Corp. (NYSE:ITC) is the least popular one with only 16 bullish hedge fund positions. Amtrust Financial Services, Inc. (NASDAQ:AFSI) 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 FCE might be a better candidate to consider a long position in.
