We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Everest Re Group Ltd (NYSE:RE) and determine whether hedge funds skillfully traded this stock.
Is Everest Re Group Ltd (NYSE:RE) undervalued? The smart money was getting more optimistic. The number of long hedge fund bets advanced by 2 in recent months. Everest Re Group Ltd (NYSE:RE) was in 29 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 27. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that RE isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
According to most investors, hedge funds are viewed as unimportant, old financial tools of the past. While there are over 8000 funds in operation today, Our researchers hone in on the bigwigs of this group, approximately 850 funds. These investment experts watch over bulk of all hedge funds’ total capital, and by shadowing their inimitable stock picks, Insider Monkey has determined a few investment strategies that have historically outpaced the market. Insider Monkey’s flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
Andreas Halvorsen of Viking Global
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, this “mom” trader turned $2000 into $2 million within 2 years. So, we are checking out her best trade idea of the month. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Now let’s view the recent hedge fund action regarding Everest Re Group Ltd (NYSE:RE).
How are hedge funds trading Everest Re Group Ltd (NYSE:RE)?
At Q2’s end, a total of 29 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 7% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards RE over the last 20 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, AQR Capital Management was the largest shareholder of Everest Re Group Ltd (NYSE:RE), with a stake worth $234.4 million reported as of the end of September. Trailing AQR Capital Management was Viking Global, which amassed a stake valued at $86.2 million. Polar Capital, Echo Street Capital Management, and Point72 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 ZWEIG DIMENNA PARTNERS allocated the biggest weight to Everest Re Group Ltd (NYSE:RE), around 2.73% of its 13F portfolio. BlueMar Capital Management is also relatively very bullish on the stock, designating 1.03 percent of its 13F equity portfolio to RE.
As industrywide interest jumped, key hedge funds have jumped into Everest Re Group Ltd (NYSE:RE) headfirst. Viking Global, managed by Andreas Halvorsen, created the most outsized position in Everest Re Group Ltd (NYSE:RE). Viking Global had $86.2 million invested in the company at the end of the quarter. Joe DiMenna’s ZWEIG DIMENNA PARTNERS also made a $25.9 million investment in the stock during the quarter. The following funds were also among the new RE investors: Robert Pohly’s Samlyn Capital, Israel Englander’s Millennium Management, and Gregg Moskowitz’s Interval Partners.
Let’s check out hedge fund activity in other stocks similar to Everest Re Group Ltd (NYSE:RE). These stocks are Phillips 66 Partners LP (NYSE:PSXP), Ionis Pharmaceuticals, Inc. (NASDAQ:IONS), Albemarle Corporation (NYSE:ALB), Immunomedics, Inc. (NASDAQ:IMMU), Royal Gold, Inc (NASDAQ:RGLD), Mobile TeleSystems Public Joint Stock Company (NYSE:MBT), and SEI Investments Company (NASDAQ:SEIC). This group of stocks’ market values resemble RE’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PSXP | 6 | 29854 | 1 |
| IONS | 23 | 387779 | 1 |
| ALB | 25 | 66986 | 1 |
| IMMU | 48 | 2295437 | 21 |
| RGLD | 27 | 425497 | -1 |
| MBT | 11 | 344072 | 2 |
| SEIC | 37 | 233631 | 4 |
| Average | 25.3 | 540465 | 4.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 25.3 hedge funds with bullish positions and the average amount invested in these stocks was $540 million. That figure was $585 million in RE’s case. Immunomedics, Inc. (NASDAQ:IMMU) is the most popular stock in this table. On the other hand Phillips 66 Partners LP (NYSE:PSXP) is the least popular one with only 6 bullish hedge fund positions. Everest Re Group Ltd (NYSE:RE) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for RE is 64.4. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 23.8% in 2020 through September 14th and beat the market by 17.6 percentage points. Unfortunately RE wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on RE were disappointed as the stock returned 2.4% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Follow Everest Group Ltd. (NYSE:EG)
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Disclosure: None. This article was originally published at Insider Monkey.
