Were Hedge Funds Right About American International Group (AIG)?
Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don't make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards American International Group Inc (NYSE:AIG) to find out whether there were any major changes in hedge funds' views.
Is American International Group Inc (NYSE:AIG) a good investment today? The smart money was turning bullish. The number of bullish hedge fund bets improved by 3 recently. American International Group Inc (NYSE:AIG) was in 41 hedge funds' portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 101. Our calculations also showed that AIG isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings). There were 38 hedge funds in our database with AIG positions at the end of the third quarter.
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. Hedge funds have more than $3.5 trillion in assets under management, so you can't expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds' moves today.
Ric Dillon of Diamond Hill Capital
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Do Hedge Funds Think AIG Is A Good Stock To Buy Now?
At the end of December, a total of 41 of the hedge funds tracked by Insider Monkey were long this stock, a change of 8% from one quarter earlier. On the other hand, there were a total of 52 hedge funds with a bullish position in AIG a year ago. With hedge funds' sentiment swirling, there exists a few key hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Diamond Hill Capital, managed by Ric Dillon, holds the biggest position in American International Group Inc (NYSE:AIG). Diamond Hill Capital has a $738.2 million position in the stock, comprising 3.5% of its 13F portfolio. On Diamond Hill Capital's heels is Pzena Investment Management, managed by Richard S. Pzena, which holds a $661.3 million position; 3.1% of its 13F portfolio is allocated to the company. Remaining hedge funds and institutional investors that hold long positions comprise Robert Rodriguez and Steven Romick's First Pacific Advisors LLC, Jeremy Hosking's Hosking Partners and Ken Griffin's Citadel Investment Group. In terms of the portfolio weights assigned to each position First Pacific Advisors LLC allocated the biggest weight to American International Group Inc (NYSE:AIG), around 5.45% of its 13F portfolio. Levin Easterly Partners is also relatively very bullish on the stock, dishing out 3.84 percent of its 13F equity portfolio to AIG.
As industrywide interest jumped, some big names have been driving this bullishness. Balyasny Asset Management, managed by Dmitry Balyasny, established the most outsized position in American International Group Inc (NYSE:AIG). Balyasny Asset Management had $19.2 million invested in the company at the end of the quarter. Sander Gerber's Hudson Bay Capital Management also initiated a $8.3 million position during the quarter. The following funds were also among the new AIG investors: Anton Schutz's Mendon Capital Advisors, Michael Gelband's ExodusPoint Capital, and Noam Gottesman's GLG Partners.
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 Banco Santander (Brasil) SA (NYSE:BSBR), Mizuho Financial Group Inc. (NYSE:MFG), Alcon Inc. (NYSE:ALC), Tencent Music Entertainment Group (NYSE:TME), Wipro Limited (NYSE:WIT), Zimmer Biomet Holdings Inc (NYSE:ZBH), and Marvell Technology Group Ltd. (NASDAQ:MRVL). This group of stocks' market values are closest to AIG's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BSBR,6,6844,1 MFG,5,14769,0 ALC,24,653511,-2 TME,26,826299,2 WIT,11,129140,2 ZBH,53,1607008,-2 MRVL,40,556230,3 Average,23.6,541972,0.6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 23.6 hedge funds with bullish positions and the average amount invested in these stocks was $542 million. That figure was $2081 million in AIG's case. Zimmer Biomet Holdings Inc (NYSE:ZBH) is the most popular stock in this table. On the other hand Mizuho Financial Group Inc. (NYSE:MFG) is the least popular one with only 5 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. Our overall hedge fund sentiment score for AIG is 57.7. 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. Our calculations showed that top 10 most popular stocks among hedge funds returned 90.7% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 35 percentage points. These stocks gained 13.6% in 2021 through April 30th and still beat the market by 1.6 percentage points. Hedge funds were also right about betting on AIG as the stock returned 28.8% since the end of Q4 (through 4/30) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.
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