Assurant, Inc. (AIZ) Fell Out Of Favor With Hedge Funds?
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).
Assurant, Inc. (NYSE:AIZ) shares haven't seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 27 hedge funds' portfolios at the end of the first quarter of 2021. Our calculations also showed that AIZ isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings). 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 Reinsurance Group of America Inc (NYSE:RGA), UGI Corp (NYSE:UGI), and Vistra Corp. (NYSE:VST) to gather more data points.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Robert Pohly of Samlyn Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, economists warn of inflation flare up. So, we are checking out this backdoor gold play that has hit peak gains of 718% in a little over a year. 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 review the key hedge fund action surrounding Assurant, Inc. (NYSE:AIZ).
Do Hedge Funds Think AIZ Is A Good Stock To Buy Now?
At the end of the first quarter, a total of 27 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the fourth quarter of 2020. Below, you can check out the change in hedge fund sentiment towards AIZ over the last 23 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Andreas Halvorsen's Viking Global has the biggest position in Assurant, Inc. (NYSE:AIZ), worth close to $393.6 million, amounting to 1.2% of its total 13F portfolio. Sitting at the No. 2 spot is Andrew Wellington and Jeff Keswin of Lyrical Asset Management, with a $175.6 million position; the fund has 2.1% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors that hold long positions consist of Robert Pohly's Samlyn Capital, Cliff Asness's AQR Capital Management and Phill Gross and Robert Atchinson's Adage Capital Management. In terms of the portfolio weights assigned to each position One Fin Capital Management allocated the biggest weight to Assurant, Inc. (NYSE:AIZ), around 7.02% of its 13F portfolio. Lyrical Asset Management is also relatively very bullish on the stock, earmarking 2.06 percent of its 13F equity portfolio to AIZ.
Due to the fact that Assurant, Inc. (NYSE:AIZ) has witnessed a decline in interest from the entirety of the hedge funds we track, we can see that there lies a certain "tier" of funds who were dropping their positions entirely by the end of the first quarter. At the top of the heap, Ira Unschuld's Brant Point Investment Management said goodbye to the largest position of the "upper crust" of funds followed by Insider Monkey, valued at about $6.5 million in stock, and D. E. Shaw's D E Shaw was right behind this move, as the fund dropped about $0.4 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's check out hedge fund activity in other stocks similar to Assurant, Inc. (NYSE:AIZ). We will take a look at Reinsurance Group of America Inc (NYSE:RGA), UGI Corp (NYSE:UGI), Vistra Corp. (NYSE:VST), Guidewire Software Inc (NYSE:GWRE), Omega Healthcare Investors Inc (NYSE:OHI), The New York Times Company (NYSE:NYT), and Ciena Corporation (NASDAQ:CIEN). All of these stocks' market caps match AIZ's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position RGA,27,355245,8 UGI,19,189152,-6 VST,46,1254154,7 GWRE,33,1534269,-2 OHI,25,190542,10 NYT,48,2399824,-2 CIEN,27,327611,3 Average,32.1,892971,2.6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 32.1 hedge funds with bullish positions and the average amount invested in these stocks was $893 million. That figure was $1029 million in AIZ's case. The New York Times Company (NYSE:NYT) is the most popular stock in this table. On the other hand UGI Corp (NYSE:UGI) is the least popular one with only 19 bullish hedge fund positions. Assurant, Inc. (NYSE:AIZ) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for AIZ is 39.6. 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 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 24% in 2021 through July 9th and beat the market by 6.7 percentage points. A small number of hedge funds were also right about betting on AIZ, though not to the same extent, as the stock returned 11.2% since the end of Q1 (through July 9th) and outperformed the market.
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Disclosure: None. This article was originally published at Insider Monkey.
