Is Reinsurance Group of America Inc (RGA) A Good Stock To Buy?

A market correction in the third quarter, spurred by a number of global macroeconomic concerns ended up having a negative impact on the markets and many hedge funds as a result. The stocks of smaller companies were especially hard hit during this time as investors fled to investments seen as being safer. This is evident in the fact that the Russell 2000 ETF underperformed the S&P 500 ETF by 14 percentage points between June 25 and the end of October. We also received indications that hedge funds were trimming their positions amid the market volatility and uncertainty, and given their greater inclination towards smaller cap stocks than other investors, it follows that a stronger sell-off occurred in those stocks. Let’s study the hedge fund sentiment to see how those concerns affected their ownership of Reinsurance Group of America Inc (NYSE:RGA) during the quarter.

Reinsurance Group of America Inc (NYSE:RGA) shareholders have witnessed a decrease in activity from the world’s largest hedge funds lately. 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 Qiagen NV (NASDAQ:QGEN), Kilroy Realty Corp (NYSE:KRC), and Waste Connections, Inc. (NYSE:WCN) to gather more data points.

In the financial world there are many methods stock market investors put to use to evaluate stocks. A duo of the less known methods are hedge fund and insider trading indicators. Our experts have shown that, historically, those who follow the best picks of the best hedge fund managers can outperform the S&P 500 by a superb margin (see the details here).

With all of this in mind, we’re going to take a glance at the key action surrounding Reinsurance Group of America Inc (NYSE:RGA).

Hedge fund activity in Reinsurance Group of America Inc (NYSE:RGA)

At the end of the third quarter, a total of 16 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -11% from one quarter earlier. With the smart money’s capital changing hands, there exists an “upper tier” of notable hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, AQR Capital Management, managed by Cliff Asness, holds the number one position in Reinsurance Group of America Inc (NYSE:RGA). AQR Capital Management has a $79.4 million position in the stock, comprising 0.2% of its 13F portfolio. Coming in second is Royce & Associates, managed by Chuck Royce, which holds a $71.2 million position; the fund has 0.4% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors that hold long positions comprise Ken Griffin’s Citadel Investment Group, Brian Ashford-Russell and Tim Woolley’s Polar Capital and D E Shaw.

Seeing as Reinsurance Group of America Inc (NYSE:RGA) has witnessed bearish sentiment from the aggregate hedge fund industry, logic holds that there is a sect of funds that slashed their entire stakes in the third quarter. At the top of the heap, Ron Bobman’s Capital Returns Management dropped the largest stake of all the hedgies followed by Insider Monkey, comprising an estimated $9.6 million in stock. Ken Gray and Steve Walsh’s fund, Bryn Mawr Capital, also dropped its stock, about $0.9 million worth. These moves are important to note, as total hedge fund interest was cut by 2 funds in the third quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Reinsurance Group of America Inc (NYSE:RGA) but similarly valued. These stocks are Qiagen NV (NASDAQ:QGEN), Kilroy Realty Corp (NYSE:KRC), Waste Connections, Inc. (NYSE:WCN), and Brookfield Infrastructure Partners L.P. (NYSE:BIP). This group of stocks’ market values match RGA’s market value.

As you can see these stocks had an average of 14.25 hedge funds with bullish positions and the average amount invested in these stocks was $129 million. That figure was $302 million in RGA’s case. Waste Connections, Inc. (NYSE:WCN) is the most popular stock in this table. On the other hand Kilroy Realty Corp (NYSE:KRC) is the least popular one with only 8 bullish hedge fund positions. Reinsurance Group of America Inc (NYSE:RGA) 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 WCN might be a better candidate to consider a long position.