Hedge funds and other investment firms run by legendary investors like Israel Englander and Ray Dalio are entrusted to manage billions of dollars of accredited investors’ money because they are without peer in the resources they use to identify the best investments for their chosen investment horizon. Moreover, they are more willing to invest a greater amount of their resources in small-cap stocks than big brokerage houses, and this is often where they generate their outperformance, which is why we pay particular attention to their best ideas in this space.
In this article, let’s take a closer look at Assured Guaranty Ltd. (NYSE:AGO). Overall, the hedge fund sentiment towards the stock remained unchanged during the third quarter and 32 funds from our database held shares of the company at the end of September. However, 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 Bank Of The Ozarks Inc (NASDAQ:OZRK), Akorn, Inc. (NASDAQ:AKRX), and Thor Industries, Inc. (NYSE:THO) to gather more data points.
Follow Assured Guaranty Ltd (NYSE:AGO)
Follow Assured Guaranty Ltd (NYSE:AGO)
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
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With all of this in mind, let’s take a glance at the recent action regarding Assured Guaranty Ltd. (NYSE:AGO).
What does the smart money think about Assured Guaranty Ltd. (NYSE:AGO)?
Heading into the fourth quarter of 2016, a total of 32 of the hedge funds tracked by Insider Monkey were bullish on Assured Guaranty. With hedge funds’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Fine Capital Partners, managed by Debra Fine, holds the biggest position in Assured Guaranty Ltd. (NYSE:AGO). Fine Capital Partners has a $90.2 million position in the stock, comprising 9.2% of its 13F portfolio. The second most bullish fund manager is Cliff Asness’ AQR Capital Management holding a $62.9 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Some other peers that hold long positions encompass Paul Marshall and Ian Wace’s Marshall Wace LLP, Anand Parekh’s Alyeska Investment Group, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.
Because Assured Guaranty Ltd. (NYSE:AGO) has witnessed declining sentiment from hedge fund managers, it’s safe to say that there is a sect of hedgies that elected to cut their entire stakes by the end of the third quarter. Intriguingly, Wayne Cooperman’s Cobalt Capital Management dumped the biggest investment of the “upper crust” of funds watched by Insider Monkey, totaling an estimated $13.2 million in call options. Ken Griffin’s fund, Citadel Investment Group, also dropped its call options, about $2.6 million worth. These moves are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s also examine hedge fund activity in other stocks similar to Assured Guaranty Ltd. (NYSE:AGO). These stocks are Bank Of The Ozarks Inc (NASDAQ:OZRK), Akorn, Inc. (NASDAQ:AKRX), Thor Industries, Inc. (NYSE:THO), and Paramount Group Inc (NYSE:PGRE). This group of stocks’ market valuations are similar to AGO’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| OZRK | 22 | 365278 | 6 |
| AKRX | 28 | 500562 | -6 |
| THO | 25 | 317743 | 2 |
| PGRE | 14 | 243991 | 3 |
As you can see these stocks had an average of 22 funds with bullish positions and the average amount invested in these stocks was $357 million. That figure was $410 million in AGO’s case. Akorn, Inc. (NASDAQ:AKRX) is the most popular stock in this table, while Paramount Group Inc (NYSE:PGRE) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks Assured Guaranty Ltd. (NYSE:AGO) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
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