How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Assurant, Inc. (NYSE:AIZ) and determine whether hedge funds had an edge regarding this stock.
Is Assurant, Inc. (NYSE:AIZ) a great investment today? Investors who are in the know were turning bullish. The number of long hedge fund bets advanced by 8 recently. Our calculations also showed that AIZ isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
If you’d ask most traders, hedge funds are viewed as slow, old financial vehicles of years past. While there are more than 8000 funds trading at present, Our experts look at the crème de la crème of this group, approximately 850 funds. These investment experts handle the majority of the hedge fund industry’s total asset base, and by following their unrivaled picks, Insider Monkey has found many investment strategies that have historically surpassed the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy surpassed the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
Donald Sussman of Paloma Partners
At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now let’s take a gander at the latest hedge fund action surrounding Assurant, Inc. (NYSE:AIZ).
What have hedge funds been doing with Assurant, Inc. (NYSE:AIZ)?
At the end of the first quarter, a total of 33 of the hedge funds tracked by Insider Monkey were long this stock, a change of 32% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in AIZ over the last 18 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.
More specifically, Viking Global was the largest shareholder of Assurant, Inc. (NYSE:AIZ), with a stake worth $223.6 million reported as of the end of September. Trailing Viking Global was Lyrical Asset Management, which amassed a stake valued at $149.1 million. Samlyn Capital, AQR Capital Management, and Adage 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 Strycker View Capital allocated the biggest weight to Assurant, Inc. (NYSE:AIZ), around 17.09% of its 13F portfolio. Prana Capital Management is also relatively very bullish on the stock, dishing out 4.27 percent of its 13F equity portfolio to AIZ.
Consequently, specific money managers were breaking ground themselves. Citadel Investment Group, managed by Ken Griffin, created the most valuable position in Assurant, Inc. (NYSE:AIZ). Citadel Investment Group had $28.7 million invested in the company at the end of the quarter. Peter Seuss’s Prana Capital Management also made a $14.7 million investment in the stock during the quarter. The following funds were also among the new AIZ investors: Gregg Moskowitz’s Interval Partners, Donald Sussman’s Paloma Partners, and D. E. Shaw’s D E Shaw.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Assurant, Inc. (NYSE:AIZ) but similarly valued. We will take a look at Alteryx, Inc. (NYSE:AYX), Universal Display Corporation (NASDAQ:OLED), PPD, Inc. (NASDAQ:PPD), and OGE Energy Corp. (NYSE:OGE). This group of stocks’ market caps match AIZ’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AYX | 43 | 1019690 | -1 |
| OLED | 24 | 222953 | -7 |
| PPD | 27 | 512293 | 27 |
| OGE | 21 | 215864 | 4 |
| Average | 28.75 | 492700 | 5.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 28.75 hedge funds with bullish positions and the average amount invested in these stocks was $493 million. That figure was $783 million in AIZ’s case. Alteryx, Inc. (NYSE:AYX) is the most popular stock in this table. On the other hand OGE Energy Corp. (NYSE:OGE) is the least popular one with only 21 bullish hedge fund positions. Assurant, Inc. (NYSE:AIZ) 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th but beat the market by 15.5 percentage points. Unfortunately AIZ wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on AIZ were disappointed as the stock returned -0.1% 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 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Follow Assurant Inc. (NYSE:AIZ)
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Disclosure: None. This article was originally published at Insider Monkey.
