Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

American Financial Group, Inc. (AFG): Are Hedge Funds Right About This Stock?

World-class money managers like Ken Griffin and Barry Rosenstein only invest their wealthy clients’ money after undertaking a rigorous examination of any potential stock. They are particularly successful in this regard when it comes to small-cap stocks, which their peerless research gives them a big information advantage on when it comes to judging their worth. It’s not surprising then that they generate their biggest returns from these stocks and invest more of their money in these stocks on average than other investors. It’s also not surprising then that we pay close attention to these picks ourselves and have built a market-beating investment strategy around them.

American Financial Group, Inc. (NYSE:AFG) was in 24 hedge funds’ portfolios at the end of September. AFG has seen an increase in hedge fund interest recently. There were 17 hedge funds in our database with AFG positions at the end of the previous quarter. Our calculations also showed that AFG isn’t among the 30 most popular stocks among hedge funds.

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 flagship best performing hedge funds strategy returned 6.3% year to date (through December 3rd) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 18 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

AQR CAPITAL MANAGEMENT

We’re going to check out the key hedge fund action surrounding American Financial Group, Inc. (NYSE:AFG).

Hedge fund activity in American Financial Group, Inc. (NYSE:AFG)

At the end of the third quarter, a total of 24 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 41% from the previous quarter. By comparison, 19 hedge funds held shares or bullish call options in AFG heading into this year. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

AFG_dec2018

When looking at the institutional investors followed by Insider Monkey, AQR Capital Management, managed by Cliff Asness, holds the largest position in American Financial Group, Inc. (NYSE:AFG). AQR Capital Management has a $164.5 million position in the stock, comprising 0.2% of its 13F portfolio. On AQR Capital Management’s heels is Renaissance Technologies, managed by Jim Simons, which holds a $62.6 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Some other peers that hold long positions comprise Daniel Johnson’s Gillson Capital, Israel Englander’s Millennium Management and Noam Gottesman’s GLG Partners.

Consequently, key hedge funds were leading the bulls’ herd. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, assembled the most outsized position in American Financial Group, Inc. (NYSE:AFG). Arrowstreet Capital had $12.4 million invested in the company at the end of the quarter. Gregg Moskowitz’s Interval Partners also made a $7 million investment in the stock during the quarter. The other funds with new positions in the stock are D. E. Shaw’s D E Shaw and Frederick DiSanto’s Ancora Advisors.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as American Financial Group, Inc. (NYSE:AFG) but similarly valued. These stocks are Iron Mountain Incorporated (NYSE:IRM), Huaneng Power International Inc (NYSE:HNP), Nielsen Holdings plc (NYSE:NLSN), and Spirit AeroSystems Holdings, Inc. (NYSE:SPR). All of these stocks’ market caps resemble AFG’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
IRM 20 107350 6
HNP 4 1992 -1
NLSN 35 1088943 14
SPR 32 2730557 2
Average 22.75 982211 5.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 22.75 hedge funds with bullish positions and the average amount invested in these stocks was $982 million. That figure was $334 million in AFG’s case. Nielsen Holdings plc (NYSE:NLSN) is the most popular stock in this table. On the other hand Huaneng Power International Inc (NYSE:HNP) is the least popular one with only 4 bullish hedge fund positions. American Financial Group, Inc. (NYSE:AFG) 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. In this regard NLSN might be a better candidate to consider a long position.

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

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.
Loading...