Hedge funds are not perfect. They have their bad picks just like everyone else. Facebook, a stock hedge funds have loved dearly, lost nearly 40% of its value at one point in 2018. Although hedge funds are not perfect, their consensus picks do deliver solid returns, however. Our data show the top 20 S&P 500 stocks among hedge funds beat the S&P 500 Index by more than 6 percentage points so far in 2019. Because hedge funds have a lot of resources and their consensus picks do well, we pay attention to what they think. In this article, we analyze what the elite funds think of Assured Guaranty Ltd. (NYSE:AGO).
Is Assured Guaranty Ltd. (NYSE:AGO) undervalued? The smart money is taking a bullish view. The number of long hedge fund bets improved by 1 in recent months. Our calculations also showed that AGO isn’t among the 30 most popular stocks among hedge funds.
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. Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 30.9% through May 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let’s take a gander at the latest hedge fund action encompassing Assured Guaranty Ltd. (NYSE:AGO).
Hedge fund activity in Assured Guaranty Ltd. (NYSE:AGO)
Heading into the second quarter of 2019, a total of 34 of the hedge funds tracked by Insider Monkey were long this stock, a change of 3% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards AGO over the last 15 quarters. With hedgies’ sentiment swirling, there exists a select group of key hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
More specifically, AQR Capital Management was the largest shareholder of Assured Guaranty Ltd. (NYSE:AGO), with a stake worth $153.1 million reported as of the end of March. Trailing AQR Capital Management was GLG Partners, which amassed a stake valued at $90.8 million. Arrowstreet Capital, Taconic Capital, and GoldenTree Asset Management were also very fond of the stock, giving the stock large weights in their portfolios.
As aggregate interest increased, key money managers have been driving this bullishness. Alyeska Investment Group, managed by Anand Parekh, established the largest position in Assured Guaranty Ltd. (NYSE:AGO). Alyeska Investment Group had $4.9 million invested in the company at the end of the quarter. Mike Vranos’s Ellington also initiated a $1.1 million position during the quarter. The other funds with brand new AGO positions are David Harding’s Winton Capital Management, Roger Ibbotson’s Zebra Capital Management, and Bruce Kovner’s Caxton Associates LP.
Let’s check out hedge fund activity in other stocks similar to Assured Guaranty Ltd. (NYSE:AGO). These stocks are Medidata Solutions Inc (NASDAQ:MDSO), Science Applications International Corp (NYSE:SAIC), Americold Realty Trust (NYSE:COLD), and Life Storage, Inc. (NYSE:LSI). This group of stocks’ market caps are closest to AGO’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MDSO | 16 | 214798 | 5 |
| SAIC | 28 | 356290 | 4 |
| COLD | 27 | 907693 | 11 |
| LSI | 15 | 274431 | 2 |
| Average | 21.5 | 438303 | 5.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.5 hedge funds with bullish positions and the average amount invested in these stocks was $438 million. That figure was $559 million in AGO’s case. Science Applications International Corp (NYSE:SAIC) is the most popular stock in this table. On the other hand Life Storage, Inc. (NYSE:LSI) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks Assured Guaranty Ltd. (NYSE:AGO) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately AGO wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on AGO were disappointed as the stock returned -6.8% during the same 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 in Q2.
Disclosure: None. This article was originally published at Insider Monkey.
