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Hedge Funds Are Dumping American Financial Group, Inc. (AFG)

Abigail Fisher

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the second quarter. You can find write-ups about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves and analyze what the smart money thinks of American Financial Group, Inc. (NYSE:AFG) based on that data.

Is American Financial Group, Inc. (NYSE:AFG) undervalued? The best stock pickers are becoming less hopeful. The number of long hedge fund bets fell by 8 in recent months. Our calculations also showed that AFG isn't among the 30 most popular stocks among hedge funds (view the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

In the 21st century investor’s toolkit there are a multitude of formulas investors put to use to analyze their stock investments. A duo of the most under-the-radar formulas are hedge fund and insider trading activity. Our researchers have shown that, historically, those who follow the best picks of the elite money managers can outclass the broader indices by a healthy amount (see the details here).

AFG_oct2019

Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let's view the recent hedge fund action surrounding American Financial Group, Inc. (NYSE:AFG).

How are hedge funds trading American Financial Group, Inc. (NYSE:AFG)?

At the end of the second quarter, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of -27% from the first quarter of 2019. The graph below displays the number of hedge funds with bullish position in AFG over the last 16 quarters. With hedge funds' positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).

Matthew Hulsizer PEAK6 Capital

The largest stake in American Financial Group, Inc. (NYSE:AFG) was held by Renaissance Technologies, which reported holding $78.1 million worth of stock at the end of March. It was followed by Lomas Capital Management with a $72.2 million position. Other investors bullish on the company included AQR Capital Management, Two Sigma Advisors, and Bishop Rock Capital.

Since American Financial Group, Inc. (NYSE:AFG) has faced a decline in interest from hedge fund managers, logic holds that there exists a select few hedgies that slashed their full holdings by the end of the second quarter. Interestingly, Daniel Johnson's Gillson Capital dropped the largest position of the "upper crust" of funds tracked by Insider Monkey, comprising about $16.6 million in stock, and Ray Dalio's Bridgewater Associates was right behind this move, as the fund dumped about $0.6 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest dropped by 8 funds by the end of the second quarter.

Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as American Financial Group, Inc. (NYSE:AFG) but similarly valued. We will take a look at Ubiquiti Networks Inc (NASDAQ:UBNT), Juniper Networks, Inc. (NYSE:JNPR), Ionis Pharmaceuticals, Inc. (NASDAQ:IONS), and Micro Focus Intl PLC (NYSE:MFGP). All of these stocks' market caps match AFG's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position UBNT,17,505790,0 JNPR,28,700453,4 IONS,18,374673,-4 MFGP,6,44588,2 Average,17.25,406376,0.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 17.25 hedge funds with bullish positions and the average amount invested in these stocks was $406 million. That figure was $367 million in AFG's case. Juniper Networks, Inc. (NYSE:JNPR) is the most popular stock in this table. On the other hand Micro Focus Intl PLC (NYSE:MFGP) is the least popular one with only 6 bullish hedge fund positions. American Financial Group, Inc. (NYSE:AFG) 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Hedge funds were also right about betting on AFG, though not to the same extent, as the stock returned 5.7% during the third quarter and outperformed the market as well.

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

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