Where Do Hedge Funds Stand On AFLAC Incorporated (AFL)?

With the first-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the second quarter of 2021. One of these stocks was AFLAC Incorporated (NYSE:AFL).

Is AFLAC Incorporated (NYSE:AFL) going to take off soon? Investors who are in the know were buying. The number of long hedge fund positions improved by 1 in recent months. AFLAC Incorporated (NYSE:AFL) was in 36 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic was previously 35. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that AFL isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 35 hedge funds in our database with AFL positions at the end of the fourth quarter.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

John Rogers of Ariel Investments

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind we’re going to take a look at the key hedge fund action regarding AFLAC Incorporated (NYSE:AFL).

Do Hedge Funds Think AFL Is A Good Stock To Buy Now?

At first quarter’s end, a total of 36 of the hedge funds tracked by Insider Monkey were long this stock, a change of 3% from one quarter earlier. By comparison, 32 hedge funds held shares or bullish call options in AFL a year ago. With the smart money’s capital changing hands, there exists a few key hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).

More specifically, D E Shaw was the largest shareholder of AFLAC Incorporated (NYSE:AFL), with a stake worth $82 million reported as of the end of March. Trailing D E Shaw was Ariel Investments, which amassed a stake valued at $78.9 million. AQR Capital Management, Citadel Investment Group, and Polar Capital 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 Sustainable Insight Capital Management allocated the biggest weight to AFLAC Incorporated (NYSE:AFL), around 1.56% of its 13F portfolio. Mountain Road Advisors is also relatively very bullish on the stock, earmarking 1.43 percent of its 13F equity portfolio to AFL.

As aggregate interest increased, key hedge funds were leading the bulls’ herd. Prana Capital Management, managed by Peter Seuss, created the most valuable position in AFLAC Incorporated (NYSE:AFL). Prana Capital Management had $11 million invested in the company at the end of the quarter. Ian Simm’s Impax Asset Management also made a $2.6 million investment in the stock during the quarter. The following funds were also among the new AFL investors: Kevin Parker’s Sustainable Insight Capital Management, Nick Thakore’s Diametric Capital, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.

Let’s now take a look at hedge fund activity in other stocks similar to AFLAC Incorporated (NYSE:AFL). We will take a look at Chewy, Inc. (NYSE:CHWY), Marathon Petroleum Corp (NYSE:MPC), The Allstate Corporation (NYSE:ALL), LyondellBasell Industries NV (NYSE:LYB), International Flavors & Fragrances Inc (NYSE:IFF), Banco Bilbao Vizcaya Argentaria SA (NYSE:BBVA), and STMicroelectronics N.V. (NYSE:STM). This group of stocks’ market valuations match AFL’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 34.7 hedge funds with bullish positions and the average amount invested in these stocks was $1183 million. That figure was $344 million in AFL’s case. International Flavors & Fragrances Inc (NYSE:IFF) is the most popular stock in this table. On the other hand Banco Bilbao Vizcaya Argentaria SA (NYSE:BBVA) is the least popular one with only 7 bullish hedge fund positions. AFLAC Incorporated (NYSE:AFL) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for AFL is 66.2. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 19.3% in 2021 through June 25th and beat the market again by 4.8 percentage points. Unfortunately AFL wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on AFL were disappointed as the stock returned 6.6% since the end of March (through 6/25) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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Disclosure: None. This article was originally published at Insider Monkey.