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Where Do Hedge Funds Stand On American Equity Investment Life Holding Company (AEL)?

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We at Insider Monkey have gone over 866 13F filings that hedge funds and prominent investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of March 31st. In this article, we look at what those funds think of American Equity Investment Life Holding Company (NYSE:AEL) based on that data.

American Equity Investment Life Holding Company (NYSE:AEL) investors should be aware of an increase in hedge fund interest of late. American Equity Investment Life Holding Company (NYSE:AEL) was in 24 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic is 24. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that AEL isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Richard Pzena - Pzena Investment Management
Richard Pzena - Pzena Investment Management

Richard S. Pzena of Pzena Investment Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, Chuck Schumer recently stated that marijuana legalization will be a Senate priority. So, we are checking out this under the radar stock that will benefit from this. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Now we're going to take a glance at the latest hedge fund action surrounding American Equity Investment Life Holding Company (NYSE:AEL).

Do Hedge Funds Think AEL Is A Good Stock To Buy Now?

At first quarter's end, a total of 24 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 4% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards AEL over the last 23 quarters. With the smart money's sentiment swirling, there exists an "upper tier" of key hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).

The largest stake in American Equity Investment Life Holding Company (NYSE:AEL) was held by Pzena Investment Management, which reported holding $71.2 million worth of stock at the end of December. It was followed by Lakewood Capital Management with a $49.8 million position. Other investors bullish on the company included Rubric Capital Management, Citadel Investment Group, and D E Shaw. In terms of the portfolio weights assigned to each position Lakewood Capital Management allocated the biggest weight to American Equity Investment Life Holding Company (NYSE:AEL), around 2.11% of its 13F portfolio. Rubric Capital Management is also relatively very bullish on the stock, dishing out 1.84 percent of its 13F equity portfolio to AEL.

As one would reasonably expect, key money managers were breaking ground themselves. Lakewood Capital Management, managed by Anthony Bozza, established the most outsized position in American Equity Investment Life Holding Company (NYSE:AEL). Lakewood Capital Management had $49.8 million invested in the company at the end of the quarter. David Rosen's Rubric Capital Management also initiated a $31.5 million position during the quarter. The other funds with brand new AEL positions are Noam Gottesman's GLG Partners, Brandon Haley's Holocene Advisors, and Parvinder Thiara's Athanor Capital.

Let's also examine hedge fund activity in other stocks similar to American Equity Investment Life Holding Company (NYSE:AEL). We will take a look at Tower Semiconductor Ltd. (NASDAQ:TSEM), Trupanion Inc (NASDAQ:TRUP), CVB Financial Corp. (NASDAQ:CVBF), Focus Financial Partners Inc. (NASDAQ:FOCS), Verint Systems Inc. (NASDAQ:VRNT), AtriCure Inc. (NASDAQ:ATRC), and Gibraltar Industries Inc (NASDAQ:ROCK). This group of stocks' market valuations are closest to AEL's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TSEM,19,389665,2 TRUP,17,209492,-1 CVBF,13,40237,2 FOCS,23,108921,14 VRNT,26,526980,6 ATRC,14,196084,-7 ROCK,20,114842,2 Average,18.9,226603,2.6 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 18.9 hedge funds with bullish positions and the average amount invested in these stocks was $227 million. That figure was $262 million in AEL's case. Verint Systems Inc. (NASDAQ:VRNT) is the most popular stock in this table. On the other hand CVB Financial Corp. (NASDAQ:CVBF) is the least popular one with only 13 bullish hedge fund positions. American Equity Investment Life Holding Company (NYSE:AEL) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for AEL is 78.3. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 23.8% in 2021 through July 16th and beat the market again by 7.7 percentage points. Unfortunately AEL wasn't nearly as popular as these 5 stocks and hedge funds that were betting on AEL were disappointed as the stock returned -1.6% since the end of March (through 7/16) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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