Hedge Funds Are Selling American Equity Investment Life Holding Company (AEL)

After several tireless days we have finished crunching the numbers from nearly 900 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms’ equity portfolios as of June 30th. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards American Equity Investment Life Holding Company (NYSE:AEL).

Is American Equity Investment Life Holding Company (NYSE:AEL) the right pick for your portfolio? The smart money was getting less optimistic. The number of long hedge fund bets were trimmed by 4 recently. American Equity Investment Life Holding Company (NYSE:AEL) was in 20 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 24. Our calculations also showed that AEL isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 24 hedge funds in our database with AEL holdings at the end of March.

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. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.

Richard S. Pzena of Pzena Investment Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, plant based food market is expected to explode 100-fold by 2050, so we are checking out this under-the-radar stock. We go through lists like the 10 best growth stocks to buy to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With all of this in mind we’re going to take a glance at the recent hedge fund action surrounding American Equity Investment Life Holding Company (NYSE:AEL).

Do Hedge Funds Think AEL Is A Good Stock To Buy Now?

At second quarter’s end, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -17% from the first quarter of 2020. By comparison, 12 hedge funds held shares or bullish call options in AEL a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in American Equity Investment Life Holding Company (NYSE:AEL) was held by Pzena Investment Management, which reported holding $67 million worth of stock at the end of June. It was followed by Lakewood Capital Management with a $53.4 million position. Other investors bullish on the company included Two Sigma Advisors, Citadel Investment Group, and Balyasny Asset Management. In terms of the portfolio weights assigned to each position Lakewood Capital Management allocated the biggest weight to American Equity Investment Life Holding Company (NYSE:AEL), around 2.2% of its 13F portfolio. Algert Global is also relatively very bullish on the stock, designating 0.73 percent of its 13F equity portfolio to AEL.

Because American Equity Investment Life Holding Company (NYSE:AEL) has witnessed a decline in interest from hedge fund managers, we can see that there is a sect of hedge funds that elected to cut their positions entirely in the second quarter. Intriguingly, David Rosen’s Rubric Capital Management cut the biggest position of the 750 funds monitored by Insider Monkey, comprising about $31.5 million in stock. Paul Marshall and Ian Wace’s fund, Marshall Wace LLP, also said goodbye to its stock, about $5 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest fell by 4 funds in the second quarter.

Let’s now review hedge fund activity in other stocks similar to American Equity Investment Life Holding Company (NYSE:AEL). We will take a look at Burning Rock Biotech Limited (NASDAQ:BNR), National Health Investors Inc (NYSE:NHI), CarGurus, Inc. (NASDAQ:CARG), Corsair Gaming, Inc. (NASDAQ:CRSR), Momentive Global Inc (NASDAQ:MNTV), 8×8, Inc. (NYSE:EGHT), and NorthWestern Corporation (NASDAQ:NWE). All of these stocks’ market caps are closest to AEL’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 18.7 hedge funds with bullish positions and the average amount invested in these stocks was $234 million. That figure was $187 million in AEL’s case. 8×8, Inc. (NYSE:EGHT) is the most popular stock in this table. On the other hand Burning Rock Biotech Limited (NASDAQ:BNR) is the least popular one with only 9 bullish hedge fund positions. American Equity Investment Life Holding Company (NYSE:AEL) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for AEL is 53.5. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through October 22nd and still beat the market by 1.6 percentage points. Hedge funds were also right about betting on AEL as the stock returned 4.8% since the end of Q2 (through 10/22) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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Disclosure: None. This article was originally published at Insider Monkey.