While the market driven by short-term sentiment influenced by the accomodative interest rate environment in the US, increasing oil prices and deteriorating expectations towards the resolution of the trade war with China, many smart money investors kept their cautious approach regarding the current bull run in the third quarter and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding American National Insurance Company (NASDAQ:ANAT).
American National Insurance Company (NASDAQ:ANAT) has seen an increase in activity from the world's largest hedge funds in recent months. Our calculations also showed that ANAT isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
[caption id="attachment_26073" align="alignnone" width="600"] Jim Simons of Renaissance Technologies[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world's largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds' buy/sell signals. We're going to view the recent hedge fund action surrounding American National Insurance Company (NASDAQ:ANAT).
How have hedgies been trading American National Insurance Company (NASDAQ:ANAT)?
Heading into the fourth quarter of 2019, a total of 16 of the hedge funds tracked by Insider Monkey were long this stock, a change of 7% from one quarter earlier. On the other hand, there were a total of 13 hedge funds with a bullish position in ANAT a year ago. With the smart money's sentiment swirling, there exists an "upper tier" of key hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).
The largest stake in American National Insurance Company (NASDAQ:ANAT) was held by Renaissance Technologies, which reported holding $21.4 million worth of stock at the end of September. It was followed by Arrowstreet Capital with a $11.8 million position. Other investors bullish on the company included Lomas Capital Management, AQR Capital Management, and Winton Capital Management. In terms of the portfolio weights assigned to each position Lomas Capital Management allocated the biggest weight to American National Insurance Company (NASDAQ:ANAT), around 0.8% of its 13F portfolio. CSat Investment Advisory is also relatively very bullish on the stock, designating 0.16 percent of its 13F equity portfolio to ANAT.
As one would reasonably expect, key money managers were leading the bulls' herd. PEAK6 Capital Management, managed by Matthew Hulsizer, initiated the biggest position in American National Insurance Company (NASDAQ:ANAT). PEAK6 Capital Management had $1.1 million invested in the company at the end of the quarter. Michael Gelband's ExodusPoint Capital also initiated a $0.6 million position during the quarter. The only other fund with a new position in the stock is Paul J. Isaac's Arbiter Partners Capital Management.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as American National Insurance Company (NASDAQ:ANAT) but similarly valued. These stocks are Cornerstone OnDemand, Inc. (NASDAQ:CSOD), Allogene Therapeutics, Inc. (NASDAQ:ALLO), MFA Financial, Inc. (NYSE:MFA), and American States Water Co (NYSE:AWR). All of these stocks' market caps resemble ANAT's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CSOD,21,721464,-6 ALLO,5,110052,-3 MFA,17,97442,0 AWR,14,83986,0 Average,14.25,253236,-2.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.25 hedge funds with bullish positions and the average amount invested in these stocks was $253 million. That figure was $60 million in ANAT's case. Cornerstone OnDemand, Inc. (NASDAQ:CSOD) is the most popular stock in this table. On the other hand Allogene Therapeutics, Inc. (NASDAQ:ALLO) is the least popular one with only 5 bullish hedge fund positions. American National Insurance Company (NASDAQ:ANAT) 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. 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. Unfortunately ANAT wasn't nearly as popular as these 20 stocks and hedge funds that were betting on ANAT were disappointed as the stock returned -4.6% during the fourth quarter (through the end of November) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.