There are several ways to beat the market, and investing in small cap stocks has historically been one of them. We like to improve the odds of beating the market further by examining what famous hedge fund operators such as Jeff Ubben, George Soros and Carl Icahn think. Those hedge fund operators make billions of dollars each year by hiring the best and the brightest to do research on stocks, including small cap stocks that big brokerage houses simply don't cover. Because of Carl Icahn and other elite funds' exemplary historical records, we pay attention to their small cap picks. In this article, we use hedge fund filing data to analyze Axis Capital Holdings Limited (NYSE:AXS).
Axis Capital Holdings Limited (NYSE:AXS) investors should be aware of an increase in hedge fund sentiment lately. AXS was in 30 hedge funds' portfolios at the end of December. There were 21 hedge funds in our database with AXS positions at the end of the previous quarter. Our calculations also showed that AXS isn't among the 30 most popular stocks among hedge funds.
According to most shareholders, hedge funds are assumed to be slow, outdated financial tools of yesteryear. While there are more than 8000 funds with their doors open today, Our researchers choose to focus on the leaders of this club, approximately 750 funds. It is estimated that this group of investors oversee most of all hedge funds' total asset base, and by tracking their unrivaled investments, Insider Monkey has deciphered several investment strategies that have historically beaten the S&P 500 index. Insider Monkey's flagship hedge fund strategy outpaced the S&P 500 index by nearly 5 percentage points a year since its inception in May 2014 through early November 2018. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 27.5% since February 2017 (through March 12th) even though the market was up nearly 25% during the same period. We just shared a list of 6 short targets in our latest quarterly update and they are already down an average of 6% in less than a month.
Let's take a look at the key hedge fund action regarding Axis Capital Holdings Limited (NYSE:AXS).
Hedge fund activity in Axis Capital Holdings Limited (NYSE:AXS)
At the end of the fourth quarter, a total of 30 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 43% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in AXS over the last 14 quarters. With the smart money's sentiment swirling, there exists a select group of noteworthy hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
More specifically, Pzena Investment Management was the largest shareholder of Axis Capital Holdings Limited (NYSE:AXS), with a stake worth $352 million reported as of the end of September. Trailing Pzena Investment Management was Renaissance Technologies, which amassed a stake valued at $75.8 million. Citadel Investment Group, Gillson Capital, and Balyasny Asset Management were also very fond of the stock, giving the stock large weights in their portfolios.
Now, key money managers were leading the bulls' herd. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, assembled the biggest position in Axis Capital Holdings Limited (NYSE:AXS). Arrowstreet Capital had $19.3 million invested in the company at the end of the quarter. Dmitry Balyasny's Balyasny Asset Management also initiated a $16 million position during the quarter. The other funds with brand new AXS positions are Steve Cohen's Point72 Asset Management, Peter Seuss's Prana Capital Management, and Michael Platt and William Reeves's BlueCrest Capital Mgmt..
Let's go over hedge fund activity in other stocks similar to Axis Capital Holdings Limited (NYSE:AXS). We will take a look at Littelfuse, Inc. (NASDAQ:LFUS), Semiconductor Manufacturing International Corporation (NYSE:SMI), Kemper Corporation (NYSE:KMPR), and Pivotal Software, Inc. (NYSE:PVTL). All of these stocks' market caps are similar to AXS's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LFUS,15,254089,-7 SMI,4,6566,-1 KMPR,15,108393,1 PVTL,32,401392,14 Average,16.5,192610,1.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.5 hedge funds with bullish positions and the average amount invested in these stocks was $193 million. That figure was $716 million in AXS's case. Pivotal Software, Inc. (NYSE:PVTL) is the most popular stock in this table. On the other hand Semiconductor Manufacturing International Corporation (NYSE:SMI) is the least popular one with only 4 bullish hedge fund positions. Axis Capital Holdings Limited (NYSE:AXS) 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 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately AXS wasn't nearly as popular as these 15 stock and hedge funds that were betting on AXS were disappointed as the stock returned 10.6% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.