Is Allied World Assurance Co Holdings, AG. (AWH) A Good Stock To Buy?

Billionaire hedge fund managers such as Steve Cohen and Stan Druckenmiller can generate millions or even billions of dollars every year by pinning down high-potential small-cap stocks and pouring cash into these candidates. Small-cap stocks are overlooked by most investors, brokerage houses, and financial services hubs, while the unlimited research abilities of the big players within the hedge fund industry can easily identify the undervalued and high-potential stocks that reside the ignored corners of equity markets. There are numerous small-cap stocks that have turned out to be great winners, which is one of the main reasons the Insider Monkey team pays close attention to the hedge fund activity in relation to these stocks.

Allied World Assurance Co Holdings, AG. (NYSE:AWH) investors should pay attention to a decrease in support from the world’s most successful money managers recently. AWH was in 17 hedge funds’ portfolios at the end of September. There were 19 hedge funds in our database with AWH positions at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Patterson-UTI Energy, Inc. (NASDAQ:PTEN), Enstar Group Ltd. (NASDAQ:ESGR), and CNO Financial Group Inc (NYSE:CNO) to gather more data points.

We follow over 700 hedge funds and other institutional investors and by analyzing their quarterly 13F filings, we identify stocks that they are collectively bullish on and develop investment strategies based on this data. One strategy that outperformed the market over the last year, involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively most bullish on. Over the past year, this strategy generated returns of 18%, topping the 8% gain registered by S&P 500 ETFs.

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Now, we’re going to take a glance at the latest action regarding Allied World Assurance Co Holdings, AG. (NYSE:AWH).

How are hedge funds trading Allied World Assurance Co Holdings, AG. (NYSE:AWH)?

Heading into the fourth quarter of 2016, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, down 11% from the second quarter of 2016. The graph below displays the number of hedge funds with bullish position in AWH over the last 5 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, David E. Shaw’s D E Shaw holds the most valuable position in Allied World Assurance Co Holdings, AG. (NYSE:AWH). According to regulatory filings, the fund has a $48.9 million position in the stock, comprising 0.1% of its 13F portfolio. The second largest stake is held by AQR Capital Management, led by Cliff Asness, holding a $45 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Some other peers that are bullish comprise Jim Simons’s Renaissance Technologies, Israel Englander’s Millennium Management and John Overdeck and David Siegel’s Two Sigma Advisors. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

Since Allied World Assurance Co Holdings, AG. (NYSE:AWH) has weathered a decline in interest from hedge fund managers, logic holds that there exists a select few hedgies who were dropping their positions entirely heading into Q4. Interestingly, Chuck Royce’s Royce & Associates said goodbye to the largest position of the “upper crust” of funds tracked by Insider Monkey, comprising close to $6.5 million in stock. Glenn Russell Dubin’s fund, Highbridge Capital Management, also dumped its stock, about $2 million worth of AWH shares.

Let’s go over hedge fund activity in other stocks similar to Allied World Assurance Co Holdings, AG. (NYSE:AWH). We will take a look at Patterson-UTI Energy, Inc. (NASDAQ:PTEN), Enstar Group Ltd. (NASDAQ:ESGR), CNO Financial Group Inc (NYSE:CNO), and Piedmont Office Realty Trust, Inc. (NYSE:PDM). This group of stocks’ market valuations are closest to AWH’s market valuation.

As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $295 million. That figure was $224 million in AWH’s case. Patterson-UTI Energy, Inc. (NASDAQ:PTEN) is the most popular stock in this table. On the other hand Piedmont Office Realty Trust, Inc. (NYSE:PDM) is the least popular one with only 10 bullish hedge fund positions. Allied World Assurance Co Holdings, AG. (NYSE:AWH) 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. In this regard PTEN might be a better candidate to consider taking a long position in.

Disclosure: none.