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Hedge Funds Aren’t Done Selling Aegon N.V. (AEG)

Abigail Fisher

In this article we will check out the progression of hedge fund sentiment towards Aegon N.V. (NYSE:AEG) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.

Aegon N.V. (NYSE:AEG) was in 4 hedge funds' portfolios at the end of the first quarter of 2020. AEG has experienced a decrease in activity from the world's largest hedge funds lately. There were 6 hedge funds in our database with AEG positions at the end of the previous quarter. Our calculations also showed that AEG isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). Video: Watch our video about the top 5 most popular hedge fund stocks.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 44 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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

[caption id="attachment_256989" align="aligncenter" width="399"] Dmitry Balyasny of Balyasny Asset Management[/caption]

Dmitry Balyasny of Balyasny Asset Managemnet

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, legendary investor Bill Miller told investors to sell 7 extremely popular recession stocks last month. So, we went through his list and recommended another stock with 100% upside potential instead. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we're going to take a look at the recent hedge fund action surrounding Aegon N.V. (NYSE:AEG).

Hedge fund activity in Aegon N.V. (NYSE:AEG)

At the end of the first quarter, a total of 4 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -33% from one quarter earlier. By comparison, 10 hedge funds held shares or bullish call options in AEG a year ago. With the smart money's positions undergoing their usual ebb and flow, there exists an "upper tier" of key hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).

According to Insider Monkey's hedge fund database, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital has the most valuable position in Aegon N.V. (NYSE:AEG), worth close to $13.8 million, comprising less than 0.1%% of its total 13F portfolio. Sitting at the No. 2 spot is Citadel Investment Group, led by Ken Griffin, holding a $1.9 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other members of the smart money that hold long positions consist of John Overdeck and David Siegel's Two Sigma Advisors, Dmitry Balyasny's Balyasny Asset Management and Ken Griffin's Citadel Investment Group. In terms of the portfolio weights assigned to each position Arrowstreet Capital allocated the biggest weight to Aegon N.V. (NYSE:AEG), around 0.04% of its 13F portfolio. Two Sigma Advisors is also relatively very bullish on the stock, earmarking 0.0038 percent of its 13F equity portfolio to AEG.

Judging by the fact that Aegon N.V. (NYSE:AEG) has faced falling interest from the aggregate hedge fund industry, logic holds that there were a few hedgies who sold off their entire stakes last quarter. Intriguingly, Israel Englander's Millennium Management sold off the biggest stake of the "upper crust" of funds followed by Insider Monkey, worth close to $0.5 million in stock, and Donald Sussman's Paloma Partners was right behind this move, as the fund sold off about $0.2 million worth. These moves are important to note, as total hedge fund interest was cut by 2 funds last quarter.

Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Aegon N.V. (NYSE:AEG) but similarly valued. These stocks are United Microelectronics Corp (NYSE:UMC), The New York Times Company (NYSE:NYT), Madison Square Garden Sports Corp. (NYSE:MSG), and Athene Holding Ltd. (NYSE:ATH). This group of stocks' market caps match AEG's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position UMC,15,98878,1 NYT,33,1414913,-2 MSG,41,1449012,-2 ATH,32,841044,-3 Average,30.25,950962,-1.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 30.25 hedge funds with bullish positions and the average amount invested in these stocks was $951 million. That figure was $17 million in AEG's case. Madison Square Garden Sports Corp. (NYSE:MSG) is the most popular stock in this table. On the other hand United Microelectronics Corp (NYSE:UMC) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks Aegon N.V. (NYSE:AEG) is even less popular than UMC. Hedge funds dodged a bullet by taking a bearish stance towards AEG. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May but managed to beat the market by 13.2 percentage points. Unfortunately AEG wasn't nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); AEG investors were disappointed as the stock returned 15.3% during the second quarter (through the end of May) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in 2020.

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

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