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Hedge Funds Are Warming Up To American International Group Inc (AIG)

Asma UL Husna

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We have processed the filings of the more than 700 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their September 30 holdings, data that is available nowhere else. Should you consider American International Group Inc (NYSE:AIG) for your portfolio? We'll look to this invaluable collective wisdom for the answer.

Is American International Group Inc (NYSE:AIG) the right pick for your portfolio? The best stock pickers are betting on the stock. The number of long hedge fund positions advanced by 8 lately. Our calculations also showed that AIG isn't among the 30 most popular stocks among hedge funds.

Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

[caption id="attachment_758429" align="aligncenter" width="450"] Ric Dillon of Diamond Hill Capital[/caption]

Ric Dillon Diamond Hill Capital

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 review the recent hedge fund action encompassing American International Group Inc (NYSE:AIG).

How are hedge funds trading American International Group Inc (NYSE:AIG)?

At Q3's end, a total of 49 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 20% from one quarter earlier. On the other hand, there were a total of 41 hedge funds with a bullish position in AIG a year ago. With the smart money's capital changing hands, there exists a few noteworthy hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).

AIG_nov2019

The largest stake in American International Group Inc (NYSE:AIG) was held by First Pacific Advisors, which reported holding $747.3 million worth of stock at the end of September. It was followed by Pzena Investment Management with a $583.3 million position. Other investors bullish on the company included Diamond Hill Capital, Levin Easterly Partners, and Millennium Management. In terms of the portfolio weights assigned to each position Spindletop Capital allocated the biggest weight to American International Group Inc (NYSE:AIG), around 14.28% of its portfolio. First Pacific Advisors is also relatively very bullish on the stock, setting aside 7.04 percent of its 13F equity portfolio to AIG.

Now, key money managers were breaking ground themselves. Ionic Capital Management, managed by Bart Baum, established the biggest call position in American International Group Inc (NYSE:AIG). Ionic Capital Management had $8.4 million invested in the company at the end of the quarter. Anand Parekh's Alyeska Investment Group also initiated a $6.2 million position during the quarter. The following funds were also among the new AIG investors: Lee Ainslie's Maverick Capital, Michael Kharitonov and Jon David McAuliffe's Voleon Capital, and Karim Abbadi and Edward McBride's Centiva Capital.

Let's now review hedge fund activity in other stocks - not necessarily in the same industry as American International Group Inc (NYSE:AIG) but similarly valued. We will take a look at TC Energy Corporation (NYSE:TRP), Infosys Limited (NYSE:INFY), Simon Property Group, Inc (NYSE:SPG), and Global Payments Inc (NYSE:GPN). This group of stocks' market caps are similar to AIG's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TRP,18,272298,6 INFY,24,1437631,-1 SPG,25,698285,-1 GPN,64,3524604,27 Average,32.75,1483205,7.75 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 32.75 hedge funds with bullish positions and the average amount invested in these stocks was $1483 million. That figure was $2451 million in AIG's case. Global Payments Inc (NYSE:GPN) is the most popular stock in this table. On the other hand TC Energy Corporation (NYSE:TRP) is the least popular one with only 18 bullish hedge fund positions. American International Group Inc (NYSE:AIG) 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 34.7% in 2019 through November 22nd and outperformed the S&P 500 ETF (SPY) by 8.5 percentage points. Unfortunately AIG wasn't nearly as popular as these 20 stocks and hedge funds that were betting on AIG were disappointed as the stock returned -4.3% during the fourth quarter (through 11/22) 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.

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