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 AXA Equitable Holdings, Inc. (NYSE:EQH) changed recently.
Is AXA Equitable Holdings, Inc. (NYSE:EQH) a bargain? The smart money is in a bearish mood. The number of bullish hedge fund positions shrunk by 11 in recent months. Our calculations also showed that EQH isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). EQH was in 21 hedge funds' portfolios at the end of September. There were 32 hedge funds in our database with EQH positions at the end of the previous quarter. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
According to most market participants, hedge funds are perceived as worthless, outdated financial tools of years past. While there are greater than 8000 funds trading at present, Our researchers look at the aristocrats of this group, approximately 750 funds. These money managers direct bulk of the smart money's total asset base, and by tailing their best equity investments, Insider Monkey has figured out a number of investment strategies that have historically beaten the S&P 500 index. Insider Monkey's flagship short hedge fund strategy outpaced the S&P 500 short ETFs by around 20 percentage points per year since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
[caption id="attachment_26082" align="aligncenter" width="466"] 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. We're going to take a peek at the fresh hedge fund action regarding AXA Equitable Holdings, Inc. (NYSE:EQH).
What does smart money think about AXA Equitable Holdings, Inc. (NYSE:EQH)?
At the end of the third quarter, a total of 21 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -34% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in EQH over the last 17 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Pzena Investment Management was the largest shareholder of AXA Equitable Holdings, Inc. (NYSE:EQH), with a stake worth $416.8 million reported as of the end of September. Trailing Pzena Investment Management was Viking Global, which amassed a stake valued at $236.6 million. Sessa Capital, AQR Capital Management, and GLG Partners were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Sessa Capital allocated the biggest weight to AXA Equitable Holdings, Inc. (NYSE:EQH), around 17.72% of its 13F portfolio. Kingstown Capital Management is also relatively very bullish on the stock, setting aside 6.6 percent of its 13F equity portfolio to EQH.
Judging by the fact that AXA Equitable Holdings, Inc. (NYSE:EQH) has experienced bearish sentiment from hedge fund managers, it's easy to see that there were a few fund managers that decided to sell off their positions entirely in the third quarter. Intriguingly, Anand Parekh's Alyeska Investment Group dumped the largest stake of the 750 funds followed by Insider Monkey, comprising close to $119.7 million in stock. James Dinan's fund, York Capital Management, also sold off its stock, about $10.5 million worth. These moves are important to note, as aggregate hedge fund interest dropped by 11 funds in the third quarter.
Let's check out hedge fund activity in other stocks similar to AXA Equitable Holdings, Inc. (NYSE:EQH). These stocks are The AES Corporation (NYSE:AES), Everest Re Group Ltd (NYSE:RE), Varian Medical Systems, Inc. (NYSE:VAR), and Tractor Supply Company (NASDAQ:TSCO). This group of stocks' market valuations are similar to EQH's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AES,24,441027,-3 RE,21,667060,-2 VAR,27,381320,2 TSCO,36,639730,1 Average,27,532284,-0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 27 hedge funds with bullish positions and the average amount invested in these stocks was $532 million. That figure was $1063 million in EQH's case. Tractor Supply Company (NASDAQ:TSCO) is the most popular stock in this table. On the other hand Everest Re Group Ltd (NYSE:RE) is the least popular one with only 21 bullish hedge fund positions. Compared to these stocks AXA Equitable Holdings, Inc. (NYSE:EQH) is even less popular than RE. Hedge funds clearly dropped the ball on EQH as the stock delivered strong returns, though hedge funds' consensus picks still generated respectable returns. 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. A small number of hedge funds were also right about betting on EQH as the stock returned 12.4% during the fourth quarter (through the end of November) and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.