Many investors, including Paul Tudor Jones or Stan Druckenmiller, have been saying before last year's Q4 market crash that the stock market is overvalued due to a low interest rate environment that leads to companies swapping their equity for debt and focusing mostly on short-term performance such as beating the quarterly earnings estimates. In the first half of 2019, most investors recovered all of their Q4 losses as sentiment shifted and optimism dominated the US China trade negotiations. Nevertheless, many of the stocks that delivered strong returns in the first half still sport strong fundamentals and their gains were more related to the general market sentiment rather than their individual performance and hedge funds kept their bullish stance. In this article we will find out how hedge fund sentiment to Athene Holding Ltd. (NYSE:ATH) changed recently.
Athene Holding Ltd. (NYSE:ATH) shares haven't seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 39 hedge funds' portfolios at the end of the third quarter of 2019. At the end of this article we will also compare ATH to other stocks including A. O. Smith Corporation (NYSE:AOS), The Toro Company (NYSE:TTC), and American Homes 4 Rent (NYSE:AMH) to get a better sense of its popularity. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_26082" align="aligncenter" width="600"] Andreas Halvorsen of Viking Global[/caption]
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. Let's take a look at the fresh hedge fund action encompassing Athene Holding Ltd. (NYSE:ATH).
What does smart money think about Athene Holding Ltd. (NYSE:ATH)?
Heading into the fourth quarter of 2019, a total of 39 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the second quarter of 2019. On the other hand, there were a total of 42 hedge funds with a bullish position in ATH a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Cliff Asness's AQR Capital Management has the largest position in Athene Holding Ltd. (NYSE:ATH), worth close to $269.2 million, comprising 0.3% of its total 13F portfolio. The second largest stake is held by Robert Pohly of Samlyn Capital, with a $196.4 million position; 4.8% of its 13F portfolio is allocated to the stock. Some other peers that are bullish consist of Andreas Halvorsen's Viking Global, Noam Gottesman's GLG Partners and Mitch Kuflik and Rob Sobel's Brahman Capital. In terms of the portfolio weights assigned to each position Stepstone Group allocated the biggest weight to Athene Holding Ltd. (NYSE:ATH), around 100% of its portfolio. Serengeti Asset Management is also relatively very bullish on the stock, earmarking 17.17 percent of its 13F equity portfolio to ATH.
Judging by the fact that Athene Holding Ltd. (NYSE:ATH) has witnessed a decline in interest from hedge fund managers, we can see that there were a few fund managers who were dropping their entire stakes heading into Q4. Interestingly, James Dinan's York Capital Management cut the biggest position of the "upper crust" of funds watched by Insider Monkey, valued at close to $19.4 million in call options. Matthew Hulsizer's fund, PEAK6 Capital Management, also dumped its call options, about $5 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's also examine hedge fund activity in other stocks similar to Athene Holding Ltd. (NYSE:ATH). These stocks are A. O. Smith Corporation (NYSE:AOS), The Toro Company (NYSE:TTC), American Homes 4 Rent (NYSE:AMH), and Apartment Investment and Management Co. (NYSE:AIV). This group of stocks' market caps resemble ATH's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AOS,18,330010,-4 TTC,19,688727,-5 AMH,23,432164,-2 AIV,24,659456,0 Average,21,527589,-2.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 21 hedge funds with bullish positions and the average amount invested in these stocks was $528 million. That figure was $1454 million in ATH's case. Apartment Investment and Management Co. (NYSE:AIV) is the most popular stock in this table. On the other hand A. O. Smith Corporation (NYSE:AOS) is the least popular one with only 18 bullish hedge fund positions. Compared to these stocks Athene Holding Ltd. (NYSE:ATH) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on ATH, though not to the same extent, as the stock returned 7% during the fourth quarter (through the end of November) and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
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