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The 800+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the fourth quarter, which unveil their equity positions as of December 31st. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards American Financial Group (NYSE:AFG).
Is AFG stock a buy? American Financial Group (NYSE:AFG) has seen a decrease in activity from the world's largest hedge funds recently. American Financial Group (NYSE:AFG) was in 24 hedge funds' portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 30. Our calculations also showed that AFG isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings).
In today’s marketplace there are plenty of indicators stock traders employ to assess stocks. A couple of the less utilized indicators are hedge fund and insider trading activity. Our experts have shown that, historically, those who follow the top picks of the best fund managers can outpace the S&P 500 by a healthy amount (see the details here). Also, our monthly newsletter's portfolio of long stock picks returned 197% since March 2017 (through March 2021) and beat the S&P 500 Index by 124 percentage points. You can download a sample issue of this newsletter on our website .
John Overdeck of Two Sigma Advisors
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the CBD market is growing at a 33% annualized rate, so we are taking a closer look at this under-the-radar hemp stock. We go through lists like the 10 best biotech stocks under $10 to identify the next stock with 10x upside potential. 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 website. With all of this in mind let's go over the key hedge fund action regarding American Financial Group (NYSE:AFG).
Do Hedge Funds Think AFG Is A Good Stock To Buy Now?
Heading into the first quarter of 2021, a total of 24 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -11% from one quarter earlier. By comparison, 25 hedge funds held shares or bullish call options in AFG a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Lomas Capital Management was the largest shareholder of American Financial Group (NYSE:AFG), with a stake worth $95.7 million reported as of the end of December. Trailing Lomas Capital Management was Citadel Investment Group, which amassed a stake valued at $47.1 million. Balyasny Asset Management, Two Sigma Advisors, and Millennium 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 Lomas Capital Management allocated the biggest weight to American Financial Group (NYSE:AFG), around 9.18% of its 13F portfolio. Full18 Capital is also relatively very bullish on the stock, setting aside 1.39 percent of its 13F equity portfolio to AFG.
Due to the fact that American Financial Group (NYSE:AFG) has witnessed bearish sentiment from hedge fund managers, it's easy to see that there was a specific group of money managers who were dropping their full holdings heading into Q1. Interestingly, Michael Gelband's ExodusPoint Capital dropped the biggest investment of all the hedgies watched by Insider Monkey, worth close to $15.1 million in stock, and Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital was right behind this move, as the fund cut about $9 million worth. These moves are intriguing to say the least, as total hedge fund interest dropped by 3 funds heading into Q1.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as American Financial Group (NYSE:AFG) but similarly valued. These stocks are Ralph Lauren Corporation (NYSE:RL), Euronet Worldwide, Inc. (NASDAQ:EEFT), Quidel Corporation (NASDAQ:QDEL), The Gap Inc. (NYSE:GPS), Gerdau SA (NYSE:GGB), Hyatt Hotels Corporation (NYSE:H), and AECOM (NYSE:ACM). All of these stocks' market caps are similar to AFG's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position RL,35,789522,6 EEFT,32,489029,-7 QDEL,29,401017,-13 GPS,38,754622,3 GGB,15,196789,4 H,27,757056,1 ACM,37,774116,-2 Average,30.4,594593,-1.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 30.4 hedge funds with bullish positions and the average amount invested in these stocks was $595 million. That figure was $276 million in AFG's case. The Gap Inc. (NYSE:GPS) is the most popular stock in this table. On the other hand Gerdau SA (NYSE:GGB) is the least popular one with only 15 bullish hedge fund positions. American Financial Group (NYSE:AFG) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for AFG is 45.6. 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. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.3% in 2021 through April 19th and still beat the market by 0.9 percentage points. A small number of hedge funds were also right about betting on AFG as the stock returned 37.6% since the end of the fourth quarter (through 4/19) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.