Is AFL Stock A Buy or Sell?
Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don't make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards AFLAC Incorporated (NYSE:AFL) to find out whether there were any major changes in hedge funds' views.
Is AFL stock a buy? AFLAC Incorporated (NYSE:AFL) investors should be aware of an increase in hedge fund interest recently. AFLAC Incorporated (NYSE:AFL) was in 35 hedge funds' portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 34. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 34 hedge funds in our database with AFL holdings at the end of September. Our calculations also showed that AFL isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings).
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 197% since March 2017 and outperformed the S&P 500 ETFs by more than 124 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Gavin Saitowitz of Prelude Capital
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 10 best battery stocks to buy 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. Keeping this in mind let's take a look at the key hedge fund action encompassing AFLAC Incorporated (NYSE:AFL).
Do Hedge Funds Think AFL Is A Good Stock To Buy Now?
Heading into the first quarter of 2021, a total of 35 of the hedge funds tracked by Insider Monkey were long this stock, a change of 3% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards AFL over the last 22 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey's hedge fund database, D E Shaw, managed by D. E. Shaw, holds the biggest position in AFLAC Incorporated (NYSE:AFL). D E Shaw has a $138.6 million position in the stock, comprising 0.1% of its 13F portfolio. The second most bullish fund manager is John W. Rogers of Ariel Investments, with a $65.2 million position; 0.7% of its 13F portfolio is allocated to the stock. Remaining hedge funds and institutional investors that hold long positions encompass Renaissance Technologies, Phill Gross and Robert Atchinson's Adage Capital Management and Paul Marshall and Ian Wace's Marshall Wace LLP. In terms of the portfolio weights assigned to each position Prospector Partners allocated the biggest weight to AFLAC Incorporated (NYSE:AFL), around 1.61% of its 13F portfolio. Mountain Road Advisors is also relatively very bullish on the stock, earmarking 1.17 percent of its 13F equity portfolio to AFL.
Now, key money managers have jumped into AFLAC Incorporated (NYSE:AFL) headfirst. Te Ahumairangi Investment Management, managed by Nicholas Bagnall, created the largest position in AFLAC Incorporated (NYSE:AFL). Te Ahumairangi Investment Management had $5.8 million invested in the company at the end of the quarter. Parvinder Thiara's Athanor Capital also initiated a $2.1 million position during the quarter. The following funds were also among the new AFL investors: Michael Gelband's ExodusPoint Capital, Gavin Saitowitz and Cisco J. del Valle's Prelude Capital (previously Springbok Capital), and Renee Yao's Neo Ivy 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 Credit Suisse Group AG (NYSE:CS), Kinder Morgan Inc (NYSE:KMI), Prudential Financial Inc (NYSE:PRU), Hilton Worldwide Holdings Inc (NYSE:HLT), ResMed Inc. (NYSE:RMD), Republic Services, Inc. (NYSE:RSG), and QuantumScape Corporation (NYSE:QS). This group of stocks' market valuations are closest to AFL's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CS,11,46020,-2 KMI,42,1031459,-4 PRU,36,532348,2 HLT,60,6029309,3 RMD,27,355462,-8 RSG,36,1099427,-1 QS,35,1848564,35 Average,35.3,1563227,3.6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 35.3 hedge funds with bullish positions and the average amount invested in these stocks was $1563 million. That figure was $389 million in AFL's case. Hilton Worldwide Holdings Inc (NYSE:HLT) is the most popular stock in this table. On the other hand Credit Suisse Group AG (NYSE:CS) is the least popular one with only 11 bullish hedge fund positions. AFLAC Incorporated (NYSE:AFL) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for AFL is 60.5. 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 7.9% in 2021 through April 1st and still beat the market by 0.4 percentage points. A small number of hedge funds were also right about betting on AFL as the stock returned 16.4% since the end of the fourth quarter (through 4/1) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
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