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Hedge Funds Souring On American National Insurance Company (ANAT)

Asma UL Husna

The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn't the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds' positions on March 31st, about a week after the S&P 500 Index bottomed. We at Insider Monkey have made an extensive database of more than 821 of those established hedge funds and famous value investors' filings. In this article, we analyze how these elite funds and prominent investors traded American National Insurance Company (NASDAQ:ANAT) based on those filings.

Is American National Insurance Company (NASDAQ:ANAT) an exceptional investment today? Money managers are reducing their bets on the stock. The number of long hedge fund bets were trimmed by 2 recently. Our calculations also showed that ANAT isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). Video: 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 monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 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_193003" align="aligncenter" width="392"] Chuck Royce of Royce & Associates[/caption]

Chuck Royce

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, we take a look at lists like the 10 best imported beer in 2020 to identify emerging trends that are likely to lead to 1000% gains in the coming years. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let's go over the fresh hedge fund action encompassing American National Insurance Company (NASDAQ:ANAT).

How have hedgies been trading American National Insurance Company (NASDAQ:ANAT)?

At Q1's end, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, a change of -13% from one quarter earlier. By comparison, 9 hedge funds held shares or bullish call options in ANAT a year ago. With hedgies' sentiment swirling, there exists an "upper tier" of key hedge fund managers who were upping their stakes significantly (or already accumulated large positions).

The largest stake in American National Insurance Company (NASDAQ:ANAT) was held by Renaissance Technologies, which reported holding $16 million worth of stock at the end of September. It was followed by Lomas Capital Management with a $10.6 million position. Other investors bullish on the company included AQR Capital Management, Citadel Investment Group, and Arrowstreet Capital. 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 1.06% of its 13F portfolio. Arbiter Partners Capital Management is also relatively very bullish on the stock, earmarking 0.17 percent of its 13F equity portfolio to ANAT.

Since American National Insurance Company (NASDAQ:ANAT) has witnessed falling interest from the aggregate hedge fund industry, it's safe to say that there lies a certain "tier" of money managers who were dropping their entire stakes by the end of the first quarter. It's worth mentioning that Noam Gottesman's GLG Partners dumped the biggest stake of the "upper crust" of funds monitored by Insider Monkey, comprising about $0.7 million in stock. Steve Cohen's fund, Point72 Asset Management, also dropped its stock, about $0.6 million worth. These transactions are interesting, as total hedge fund interest was cut by 2 funds by the end of the first quarter.

Let's go over 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 Laureate Education, Inc. (NASDAQ:LAUR), Macquarie Infrastructure Corporation (NYSE:MIC), LivaNova PLC (NASDAQ:LIVN), and GATX Corporation (NYSE:GATX). 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 LAUR,25,197669,-9 MIC,30,251515,-4 LIVN,24,235932,2 GATX,13,169186,-8 Average,23,213576,-4.75 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 23 hedge funds with bullish positions and the average amount invested in these stocks was $214 million. That figure was $48 million in ANAT's case. Macquarie Infrastructure Corporation (NYSE:MIC) is the most popular stock in this table. On the other hand GATX Corporation (NYSE:GATX) is the least popular one with only 13 bullish hedge fund positions. American National Insurance Company (NASDAQ:ANAT) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.3% in 2020 through June 25th and surpassed the market by 16.8 percentage points. Unfortunately ANAT wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); ANAT investors were disappointed as the stock returned -10.3% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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

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