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Hedge Funds Are Dumping Everest Re Group Ltd (RE)

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In this article we will check out the progression of hedge fund sentiment towards Everest Re Group Ltd (NYSE:RE) 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.

Is Everest Re Group Ltd (NYSE:RE) undervalued? Money managers were in a pessimistic mood. The number of long hedge fund bets were trimmed by 2 recently. Everest Re Group Ltd (NYSE:RE) was in 30 hedge funds' portfolios at the end of the second quarter of 2021. The all time high for this statistic is 36. Our calculations also showed that RE isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 79 percentage points since March 2017 (see the details here). That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Tim Woolley of Polar Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV 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. With all of this in mind we're going to take a glance at the new hedge fund action regarding Everest Re Group Ltd (NYSE:RE).

Do Hedge Funds Think RE Is A Good Stock To Buy Now?

Heading into the third quarter of 2021, a total of 30 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -6% from the first quarter of 2020. On the other hand, there were a total of 29 hedge funds with a bullish position in RE a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, AQR Capital Management, managed by Cliff Asness, holds the biggest position in Everest Re Group Ltd (NYSE:RE). AQR Capital Management has a $181 million position in the stock, comprising 0.3% of its 13F portfolio. On AQR Capital Management's heels is Southeastern Asset Management, managed by Mason Hawkins, which holds a $125.7 million position; 2.5% of its 13F portfolio is allocated to the company. Some other professional money managers that are bullish comprise Brian Ashford-Russell and Tim Woolley's Polar Capital, Phill Gross and Robert Atchinson's Adage Capital Management and Renaissance Technologies. In terms of the portfolio weights assigned to each position Southeastern Asset Management allocated the biggest weight to Everest Re Group Ltd (NYSE:RE), around 2.53% of its 13F portfolio. Prana Capital Management is also relatively very bullish on the stock, setting aside 2.09 percent of its 13F equity portfolio to RE.

Since Everest Re Group Ltd (NYSE:RE) has witnessed falling interest from the smart money, we can see that there were a few money managers who sold off their full holdings in the second quarter. At the top of the heap, Alec Litowitz and Ross Laser's Magnetar Capital sold off the largest investment of the "upper crust" of funds tracked by Insider Monkey, worth about $3.2 million in stock, and Michael Gelband's ExodusPoint Capital was right behind this move, as the fund cut about $2.7 million worth. These bearish behaviors are interesting, as total hedge fund interest fell by 2 funds in the second quarter.

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Everest Re Group Ltd (NYSE:RE) but similarly valued. We will take a look at Gerdau SA (NYSE:GGB), Robert Half International Inc. (NYSE:RHI), Jones Lang LaSalle Inc (NYSE:JLL), Proofpoint Inc (NASDAQ:PFPT), Penumbra Inc (NYSE:PEN), Carlisle Companies, Inc. (NYSE:CSL), and Natera Inc (NASDAQ:NTRA). This group of stocks' market values are similar to RE's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GGB,17,318478,6 RHI,23,281889,-4 JLL,31,1554013,11 PFPT,48,2591761,26 PEN,30,571116,3 CSL,17,146681,-1 NTRA,52,1896341,11 Average,31.1,1051468,7.4 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 31.1 hedge funds with bullish positions and the average amount invested in these stocks was $1051 million. That figure was $686 million in RE's case. Natera Inc (NASDAQ:NTRA) is the most popular stock in this table. On the other hand Gerdau SA (NYSE:GGB) is the least popular one with only 17 bullish hedge fund positions. Everest Re Group Ltd (NYSE:RE) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for RE is 46.6. 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 24.9% in 2021 through October 15th and still beat the market by 4.5 percentage points. A small number of hedge funds were also right about betting on RE as the stock returned 11.1% since the end of the second quarter (through 10/15) and outperformed the market by an even larger margin.

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