U.S. Markets close in 4 hrs 27 mins

Hedge Fund Darlings vs. Assurant, Inc. (AIZ) In 2019

Nina Todic

It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. The Standard and Poor’s 500 Total Return Index ETFs returned approximately 31% in 2019 (through December 23rd). Conversely, hedge funds’ top 20 large-cap stock picks generated a return of 41.1% during the same period, with the majority of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds' consensus stock picks generate superior risk-adjusted returns. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like Assurant, Inc. (NYSE:AIZ).

Is Assurant, Inc. (NYSE:AIZ) an excellent investment right now? The smart money is getting less bullish. The number of long hedge fund bets retreated by 2 lately. Our calculations also showed that AIZ isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings). AIZ was in 27 hedge funds' portfolios at the end of September. There were 29 hedge funds in our database with AIZ positions at the end of the previous quarter.

To the average investor there are numerous signals investors use to value their stock investments. A couple of the less known signals are hedge fund and insider trading moves. Our experts have shown that, historically, those who follow the top picks of the top fund managers can outclass the S&P 500 by a healthy amount (see the details here).

[caption id="attachment_30621" align="aligncenter" width="487"] Cliff Asness of AQR Capital Management[/caption]

AQR CAPITAL MANAGEMENT

We leave no stone unturned when looking for the next great investment idea. For example one of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock is still extremely cheap despite already gaining 20 percent. Keeping this in mind let's check out the new hedge fund action regarding Assurant, Inc. (NYSE:AIZ).

Hedge fund activity in Assurant, Inc. (NYSE:AIZ)

At Q3's end, a total of 27 of the hedge funds tracked by Insider Monkey were long this stock, a change of -7% from one quarter earlier. By comparison, 23 hedge funds held shares or bullish call options in AIZ a year ago. With the smart money's capital changing hands, there exists a select group of noteworthy hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).

More specifically, Lyrical Asset Management was the largest shareholder of Assurant, Inc. (NYSE:AIZ), with a stake worth $208.8 million reported as of the end of September. Trailing Lyrical Asset Management was Viking Global, which amassed a stake valued at $177.9 million. Renaissance Technologies, Samlyn Capital, and AQR Capital 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 One Fin Capital Management allocated the biggest weight to Assurant, Inc. (NYSE:AIZ), around 5.58% of its 13F portfolio. Strycker View Capital is also relatively very bullish on the stock, setting aside 4.64 percent of its 13F equity portfolio to AIZ.

Because Assurant, Inc. (NYSE:AIZ) has witnessed a decline in interest from hedge fund managers, we can see that there lies a certain "tier" of hedgies that decided to sell off their positions entirely in the third quarter. At the top of the heap, James Dinan's York Capital Management cut the biggest investment of the "upper crust" of funds tracked by Insider Monkey, totaling an estimated $21.6 million in stock, and Dmitry Balyasny's Balyasny Asset Management was right behind this move, as the fund dropped about $15.7 million worth. These moves are intriguing to say the least, as total hedge fund interest dropped by 2 funds in the third quarter.

Let's check out hedge fund activity in other stocks similar to Assurant, Inc. (NYSE:AIZ). We will take a look at Graco Inc. (NYSE:GGG), Hyatt Hotels Corporation (NYSE:H), Fortune Brands Home & Security Inc (NYSE:FBHS), and AMERCO (NASDAQ:UHAL). This group of stocks' market caps are similar to AIZ's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GGG,19,187451,-5 H,28,932324,5 FBHS,33,555866,2 UHAL,10,400813,-5 Average,22.5,519114,-0.75 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 22.5 hedge funds with bullish positions and the average amount invested in these stocks was $519 million. That figure was $905 million in AIZ's case. Fortune Brands Home & Security Inc (NYSE:FBHS) is the most popular stock in this table. On the other hand AMERCO (NASDAQ:UHAL) is the least popular one with only 10 bullish hedge fund positions. Assurant, Inc. (NYSE:AIZ) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Hedge funds were also right about betting on AIZ as the stock returned 46.2% in 2019 (through December 23rd) and outperformed the market. Hedge funds were rewarded for their relative bullishness. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

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

Related Content