It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. Since stock returns aren’t usually symmetrically distributed and index returns are more affected by a few outlier stocks (i.e. the FAANG stocks dominating and driving S&P 500 Index’s returns in recent years), more than 50% of the constituents of the Standard and Poor’s 500 Index underperform the benchmark. Hence, if you randomly pick a stock, there is more than 50% chance that you’d fail to beat the market. At the same time, the 20 most favored S&P 500 stocks by the hedge funds monitored by Insider Monkey generated an outperformance of more than 10 percentage points so far in 2019. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their moves can beat the broader market on average. That’s why we are going to go over recent hedge fund activity in Athene Holding Ltd. (NYSE:ATH).
Hedge fund interest in Athene Holding Ltd. (NYSE:ATH) shares was flat at the end of last quarter. This is usually a negative indicator. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as A. O. Smith Corporation (NYSE:AOS), The Toro Company (NYSE:TTC), and American Homes 4 Rent (NYSE:AMH) to gather more data points. Our calculations also showed that ATH 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).
In the eyes of most investors, hedge funds are viewed as unimportant, old investment tools of the past. While there are over 8000 funds in operation at the moment, We choose to focus on the masters of this group, around 750 funds. Most estimates calculate that this group of people administer most of the hedge fund industry’s total asset base, and by observing their inimitable picks, Insider Monkey has formulated numerous investment strategies that have historically defeated Mr. Market. Insider Monkey’s flagship short hedge fund strategy surpassed the S&P 500 short ETFs by around 20 percentage points per annum since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
Andreas Halvorsen of Viking Global
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. 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 already gained 20 percent. Now let’s go over the latest hedge fund action encompassing Athene Holding Ltd. (NYSE:ATH).
Hedge fund activity in Athene Holding Ltd. (NYSE:ATH)
Heading into the fourth quarter of 2019, a total of 39 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards ATH 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, AQR Capital Management held the most valuable stake in Athene Holding Ltd. (NYSE:ATH), which was worth $269.2 million at the end of the third quarter. On the second spot was Samlyn Capital which amassed $196.4 million worth of shares. Viking Global, GLG Partners, and Brahman Capital 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 Stepstone Group allocated the biggest weight to Athene Holding Ltd. (NYSE:ATH), around 100% of its 13F portfolio. Serengeti Asset Management is also relatively very bullish on the stock, setting aside 17.17 percent of its 13F equity portfolio to ATH.
Judging by the fact that Athene Holding Ltd. (NYSE:ATH) has witnessed a decline in interest from the smart money, we can see that there is a sect of hedge funds who sold off their full holdings in the third quarter. It’s worth mentioning that James Dinan’s York Capital Management said goodbye to the largest investment of all the hedgies followed by Insider Monkey, valued at an estimated $19.4 million in call options. Matthew Hulsizer’s fund, PEAK6 Capital Management, also cut its call options, about $5 million worth. These moves are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s check out hedge fund activity in other stocks similar to Athene Holding Ltd. (NYSE:ATH). These stocks are A. O. Smith Corporation (NYSE:AOS), The Toro Company (NYSE:TTC), American Homes 4 Rent (NYSE:AMH), and Apartment Investment and Management Co. (NYSE:AIV). All of these stocks’ market caps are similar to ATH’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AOS | 18 | 330010 | -4 |
| TTC | 19 | 688727 | -5 |
| AMH | 23 | 432164 | -2 |
| AIV | 24 | 659456 | 0 |
| Average | 21 | 527589 | -2.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 21 hedge funds with bullish positions and the average amount invested in these stocks was $528 million. That figure was $1454 million in ATH’s case. Apartment Investment and Management Co. (NYSE:AIV) is the most popular stock in this table. On the other hand A. O. Smith Corporation (NYSE:AOS) is the least popular one with only 18 bullish hedge fund positions. Compared to these stocks Athene Holding Ltd. (NYSE:ATH) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Unfortunately ATH wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on ATH were disappointed as the stock returned 18.8% so far in 2019 (through 12/23) 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.
