Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (read our latest 10 coronavirus predictions).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We have processed the filings of the more than 835 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their December 31 holdings, data that is available nowhere else. Should you consider Equitable Holdings, Inc. (NYSE:EQH) for your portfolio? We’ll look to this invaluable collective wisdom for the answer.
Equitable Holdings, Inc. (NYSE:EQH) investors should be aware of an increase in enthusiasm from smart money in recent months. Our calculations also showed that EQH isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 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 41 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
John Petry of Sessa Capital
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s take a peek at the key hedge fund action surrounding Equitable Holdings, Inc. (NYSE:EQH).
What does smart money think about Equitable Holdings, Inc. (NYSE:EQH)?
Heading into the first quarter of 2020, a total of 33 of the hedge funds tracked by Insider Monkey were long this stock, a change of 43% from the previous quarter. On the other hand, there were a total of 26 hedge funds with a bullish position in EQH 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.
More specifically, Pzena Investment Management was the largest shareholder of Equitable Holdings, Inc. (NYSE:EQH), with a stake worth $490.1 million reported as of the end of September. Trailing Pzena Investment Management was Citadel Investment Group, which amassed a stake valued at $224.5 million. Viking Global, Sessa Capital, and AQR Capital 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 Sessa Capital allocated the biggest weight to Equitable Holdings, Inc. (NYSE:EQH), around 17.41% of its 13F portfolio. Soapstone Capital is also relatively very bullish on the stock, designating 3.94 percent of its 13F equity portfolio to EQH.
Consequently, specific money managers have jumped into Equitable Holdings, Inc. (NYSE:EQH) headfirst. Alyeska Investment Group, managed by Anand Parekh, initiated the most outsized position in Equitable Holdings, Inc. (NYSE:EQH). Alyeska Investment Group had $77.9 million invested in the company at the end of the quarter. Benjamin A. Smith’s Laurion Capital Management also initiated a $27.6 million position during the quarter. The other funds with brand new EQH positions are D. E. Shaw’s D E Shaw, Phill Gross and Robert Atchinson’s Adage Capital Management, and Israel Englander’s Millennium Management.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Equitable Holdings, Inc. (NYSE:EQH) but similarly valued. These stocks are Domino’s Pizza, Inc. (NYSE:DPZ), 0, Open Text Corporation (NASDAQ:OTEX), and Noble Energy, Inc. (NASDAQ:NBL). This group of stocks’ market valuations resemble EQH’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| DPZ | 31 | 1995378 | -8 |
| J | 35 | 1066423 | 6 |
| OTEX | 14 | 518546 | -1 |
| NBL | 28 | 488251 | -1 |
| Average | 27 | 1017150 | -1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 27 hedge funds with bullish positions and the average amount invested in these stocks was $1017 million. That figure was $1557 million in EQH’s case. 0 is the most popular stock in this table. On the other hand Open Text Corporation (NASDAQ:OTEX) is the least popular one with only 14 bullish hedge fund positions. Equitable Holdings, Inc. (NYSE:EQH) is not the most popular stock in this group but hedge fund interest is still above average. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 22.3% in 2020 through March 16th but beat the market by 3.2 percentage points. Unfortunately EQH wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on EQH were disappointed as the stock returned -46.1% 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 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
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.
