Hedge Funds Are Warming Up To American International Group Inc (AIG)

While the market driven by short-term sentiment influenced by the accommodative interest rate environment in the US, virus news and stimulus spending, many smart money investors are starting to get cautious towards the current bull run since March, 2020 and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding American International Group Inc (NYSE:AIG).

American International Group Inc (NYSE:AIG) investors should be aware of an increase in activity from the world’s largest hedge funds of late. American International Group Inc (NYSE:AIG) was in 39 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 101. Our calculations also showed that AIG isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still 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). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

Ryan Tolkin, CIO of Schonfeld Strategic Advisors

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, we like undervalued, EBITDA-positive growth stocks, so we are checking out stock pitches like this emerging biotech stock. We go through lists like the 10 best EV stocks 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. Now we’re going to view the recent hedge fund action surrounding American International Group Inc (NYSE:AIG).

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

At second quarter’s end, a total of 39 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 18% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards AIG over the last 24 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Diamond Hill Capital was the largest shareholder of American International Group Inc (NYSE:AIG), with a stake worth $982.8 million reported as of the end of June. Trailing Diamond Hill Capital was Pzena Investment Management, which amassed a stake valued at $870.1 million. First Pacific Advisors LLC, Hosking Partners, and Balyasny Asset Management 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 First Pacific Advisors LLC allocated the biggest weight to American International Group Inc (NYSE:AIG), around 5.15% of its 13F portfolio. Diamond Hill Capital is also relatively very bullish on the stock, setting aside 3.73 percent of its 13F equity portfolio to AIG.

As aggregate interest increased, key hedge funds have been driving this bullishness. Balyasny Asset Management, managed by Dmitry Balyasny, created the most valuable position in American International Group Inc (NYSE:AIG). Balyasny Asset Management had $71.3 million invested in the company at the end of the quarter. Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors also initiated a $13.5 million position during the quarter. The other funds with new positions in the stock are Daniel Johnson’s Gillson Capital, Jinghua Yan’s TwinBeech Capital, and Greg Eisner’s Engineers Gate Manager.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as American International Group Inc (NYSE:AIG) but similarly valued. We will take a look at Barclays PLC (NYSE:BCS), Microchip Technology Incorporated (NASDAQ:MCHP), Amphenol Corporation (NYSE:APH), Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN), Baxter International Inc. (NYSE:BAX), Prudential Financial Inc (NYSE:PRU), and Las Vegas Sands Corp. (NYSE:LVS). This group of stocks’ market caps match AIG’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 41.6 hedge funds with bullish positions and the average amount invested in these stocks was $2529 million. That figure was $2745 million in AIG’s case. Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN) is the most popular stock in this table. On the other hand Barclays PLC (NYSE:BCS) is the least popular one with only 11 bullish hedge fund positions. American International Group Inc (NYSE:AIG) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for AIG is 45.7. 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 21.8% in 2021 through October 11th and still beat the market by 4.4 percentage points. A small number of hedge funds were also right about betting on AIG as the stock returned 22.3% since the end of the second quarter (through 10/11) and outperformed the market by an even larger margin.

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