How do we determine whether Amtrust Financial Services, Inc. (NASDAQ:AFSI) makes for a good investment at the moment? We analyze the sentiment of a select group of the very best investors in the world, who spend immense amounts of time and resources studying companies. They may not always be right (no one is), but data shows that their consensus long positions have historically outperformed the market when we adjust for known risk factors.
Is Amtrust Financial Services, Inc. (NASDAQ:AFSI) worth your attention right now? The smart money is getting more bullish. The number of long hedge fund positions advanced by 1 recently. Our calculations also showed that afsi isn't among the 30 most popular stocks among hedge funds.
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 flagship best performing hedge funds strategy returned 6.3% year to date (through December 3rd) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 18 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Let's go over the latest hedge fund action regarding Amtrust Financial Services, Inc. (NASDAQ:AFSI).
How are hedge funds trading Amtrust Financial Services, Inc. (NASDAQ:AFSI)?
At the end of the third quarter, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 9% from the previous quarter. On the other hand, there were a total of 9 hedge funds with a bullish position in AFSI at the beginning of this year. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Amtrust Financial Services, Inc. (NASDAQ:AFSI) was held by Icahn Capital LP, which reported holding $267.4 million worth of stock at the end of September. It was followed by Alpine Associates with a $41.5 million position. Other investors bullish on the company included LMR Partners, Water Island Capital, and Renaissance Technologies.
With a general bullishness amongst the heavyweights, key money managers were breaking ground themselves. LMR Partners, managed by Ben Levine, Andrew Manuel and Stefan Renold, assembled the largest position in Amtrust Financial Services, Inc. (NASDAQ:AFSI). LMR Partners had $15.1 million invested in the company at the end of the quarter. Ken Griffin's Citadel Investment Group also initiated a $0.2 million position during the quarter. The only other fund with a new position in the stock is Frederick DiSanto's Ancora Advisors.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Amtrust Financial Services, Inc. (NASDAQ:AFSI) but similarly valued. These stocks are Cactus, Inc. (NYSE:WHD), Eaton Vance Tax-Managed Global Diversified Equity Income Fund (NYSE:EXG), National General Holdings Corp (NASDAQ:NGHC), and Stag Industrial Inc (NYSE:STAG). This group of stocks' market valuations are closest to AFSI's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WHD,17,203276,1 EXG,2,536,1 NGHC,11,200585,2 STAG,11,70370,2 Average,10.25,118692,1.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.25 hedge funds with bullish positions and the average amount invested in these stocks was $119 million. That figure was $343 million in AFSI's case. Cactus, Inc. (NYSE:WHD) is the most popular stock in this table. On the other hand Eaton Vance Tax-Managed Global Diversified Equity Income Fund (NYSE:EXG) is the least popular one with only 2 bullish hedge fund positions. Amtrust Financial Services, Inc. (NASDAQ:AFSI) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. In this regard WHD might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.