Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 750 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about American Equity Investment Life Holding Company (NYSE:AEL) in this article.
American Equity Investment Life Holding Company (NYSE:AEL) shares haven’t seen a lot of action during the first quarter. Overall, hedge fund sentiment was unchanged. The stock was in 17 hedge funds’ portfolios at the end of March. At the end of this article we will also compare AEL to other stocks including Greif, Inc. (NYSE:GEF), Apollo Commercial Real Est. Finance Inc (NYSE:ARI), and Brady Corp (NYSE:BRC) to get a better sense of its popularity.
To most stock holders, hedge funds are viewed as slow, old investment tools of years past. While there are more than 8000 funds trading at present, Our experts hone in on the top tier of this club, approximately 750 funds. These money managers handle most of all hedge funds’ total capital, and by following their first-class investments, Insider Monkey has identified several investment strategies that have historically outpaced Mr. Market. Insider Monkey’s flagship hedge fund strategy outstripped the S&P 500 index by around 5 percentage points annually since its inception in May 2014 through June 18th. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 28.2% since February 2017 (through June 18th) even though the market was up nearly 30% during the same period. We just shared a list of 5 short targets in our latest quarterly update and they are already down an average of 8.2% in a month whereas our long picks outperformed the market by 2.5 percentage points in this volatile 5 week period (our long picks also beat the market by 15 percentage points so far this year).
Noam Gottesman, GLG Partners
Let’s take a look at the key hedge fund action surrounding American Equity Investment Life Holding Company (NYSE:AEL).
How have hedgies been trading American Equity Investment Life Holding Company (NYSE:AEL)?
At Q1’s end, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards AEL over the last 15 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Pzena Investment Management, managed by Richard S. Pzena, holds the biggest position in American Equity Investment Life Holding Company (NYSE:AEL). Pzena Investment Management has a $31.9 million position in the stock, comprising 0.2% of its 13F portfolio. On Pzena Investment Management’s heels is Ken Griffin of Citadel Investment Group, with a $13.4 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Some other hedge funds and institutional investors that hold long positions include Noam Gottesman’s GLG Partners, Anand Parekh’s Alyeska Investment Group and Ron Bobman’s Capital Returns Management.
Due to the fact that American Equity Investment Life Holding Company (NYSE:AEL) has experienced declining sentiment from the entirety of the hedge funds we track, it’s safe to say that there is a sect of funds who sold off their positions entirely last quarter. Interestingly, Paul Marshall and Ian Wace’s Marshall Wace LLP cut the largest investment of the 700 funds tracked by Insider Monkey, valued at an estimated $1.5 million in call options, and D. E. Shaw’s D E Shaw was right behind this move, as the fund dumped about $0.6 million worth. These transactions are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s go over hedge fund activity in other stocks similar to American Equity Investment Life Holding Company (NYSE:AEL). We will take a look at Greif, Inc. (NYSE:GEF), Apollo Commercial Real Est. Finance Inc (NYSE:ARI), Brady Corp (NYSE:BRC), and Healthcare Services Group, Inc. (NASDAQ:HCSG). This group of stocks’ market values resemble AEL’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| GEF | 21 | 141411 | 1 |
| ARI | 11 | 27403 | 1 |
| BRC | 15 | 183504 | -5 |
| HCSG | 21 | 101611 | 9 |
| Average | 17 | 113482 | 1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $113 million. That figure was $84 million in AEL’s case. Greif, Inc. (NYSE:GEF) is the most popular stock in this table. On the other hand Apollo Commercial Real Est. Finance Inc (NYSE:ARI) is the least popular one with only 11 bullish hedge fund positions. American Equity Investment Life Holding Company (NYSE:AEL) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and 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 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately AEL wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); AEL investors were disappointed as the stock returned 0.7% 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 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.
