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Do Hedge Funds Love Reinsurance Group of America Inc (RGA)?

Abigail Fisher

Does Reinsurance Group of America Inc (NYSE:RGA) represent a good buying opportunity at the moment? Let’s quickly check the hedge fund interest towards the company. Hedge fund firms constantly search out bright intellectuals and highly-experienced employees and throw away millions of dollars on satellite photos and other research activities, so it is no wonder why they tend to generate millions in profits each year. It is also true that some hedge fund players fail inconceivably on some occasions, but net net their stock picks have been generating superior risk-adjusted returns on average over the years.

Reinsurance Group of America Inc (NYSE:RGA) has experienced an increase in activity from the world's largest hedge funds lately. Our calculations also showed that RGA 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

Why do we pay any attention at all to hedge fund sentiment? 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 market by 40 percentage points since May 2014 through May 30, 2019 (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 25.7% through September 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

RGA_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. We're going to review the recent hedge fund action encompassing Reinsurance Group of America Inc (NYSE:RGA).

What does smart money think about Reinsurance Group of America Inc (NYSE:RGA)?

Heading into the third quarter of 2019, a total of 26 of the hedge funds tracked by Insider Monkey were long this stock, a change of 13% from one quarter earlier. On the other hand, there were a total of 20 hedge funds with a bullish position in RGA 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.

Bruce Kovner, Caxton Associates LP

Of the funds tracked by Insider Monkey, AQR Capital Management, managed by Cliff Asness, holds the most valuable position in Reinsurance Group of America Inc (NYSE:RGA). AQR Capital Management has a $190.1 million position in the stock, comprising 0.2% of its 13F portfolio. Sitting at the No. 2 spot is Citadel Investment Group, managed by Ken Griffin, which holds a $73.1 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Remaining members of the smart money that are bullish encompass Ric Dillon's Diamond Hill Capital, Brian Ashford-Russell and Tim Woolley's Polar Capital and Israel Englander's Millennium Management.

With a general bullishness amongst the heavyweights, some big names were breaking ground themselves. Laurion Capital Management, managed by Benjamin A. Smith, initiated the most outsized position in Reinsurance Group of America Inc (NYSE:RGA). Laurion Capital Management had $1.8 million invested in the company at the end of the quarter. Bruce Kovner's Caxton Associates LP also initiated a $0.9 million position during the quarter. The other funds with new positions in the stock are Paul Tudor Jones's Tudor Investment Corp, Minhua Zhang's Weld Capital Management, and John Overdeck and David Siegel's Two Sigma Advisors.

Let's now review hedge fund activity in other stocks similar to Reinsurance Group of America Inc (NYSE:RGA). These stocks are Invesco Ltd. (NYSE:IVZ), Carvana Co. (NYSE:CVNA), Cabot Oil & Gas Corporation (NYSE:COG), and Brown & Brown, Inc. (NYSE:BRO). This group of stocks' market caps are closest to RGA's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position IVZ,20,210595,-4 CVNA,45,1801168,4 COG,37,932105,5 BRO,21,759675,4 Average,30.75,925886,2.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 30.75 hedge funds with bullish positions and the average amount invested in these stocks was $926 million. That figure was $474 million in RGA's case. Carvana Co. (NYSE:CVNA) is the most popular stock in this table. On the other hand Invesco Ltd. (NYSE:IVZ) is the least popular one with only 20 bullish hedge fund positions. Reinsurance Group of America Inc (NYSE:RGA) is not the least popular stock in this group but hedge fund interest is still below 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. A small number of hedge funds were also right about betting on RGA, though not to the same extent, as the stock returned 3% during the third quarter and outperformed the market.

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

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