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Did Hedge Funds Make The Right Call On Equitable Holdings, Inc. (EQH) ?

We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Equitable Holdings, Inc. (NYSE:EQH) and determine whether hedge funds skillfully traded this stock.

Equitable Holdings, Inc. (NYSE:EQH) has experienced a decrease in enthusiasm from smart money lately. Our calculations also showed that EQH isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

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 monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

John Petry Sessa Capital

John Petry of Sessa Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now let’s analyze the latest hedge fund action surrounding Equitable Holdings, Inc. (NYSE:EQH).

Hedge fund activity in Equitable Holdings, Inc. (NYSE:EQH)

Heading into the second quarter of 2020, a total of 27 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -18% from the previous quarter. On the other hand, there were a total of 35 hedge funds with a bullish position in EQH a year ago. With hedgies’ sentiment swirling, there exists a few notable hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).

More specifically, Pzena Investment Management was the largest shareholder of Equitable Holdings, Inc. (NYSE:EQH), with a stake worth $319.3 million reported as of the end of September. Trailing Pzena Investment Management was Citadel Investment Group, which amassed a stake valued at $169.3 million. Point72 Asset Management, Sessa Capital, and AQR Capital Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Sessa Capital allocated the biggest weight to Equitable Holdings, Inc. (NYSE:EQH), around 10.97% of its 13F portfolio. Capital Returns Management is also relatively very bullish on the stock, designating 9.97 percent of its 13F equity portfolio to EQH.

Seeing as Equitable Holdings, Inc. (NYSE:EQH) has witnessed a decline in interest from the entirety of the hedge funds we track, logic holds that there were a few money managers that elected to cut their positions entirely heading into Q4. At the top of the heap, Andreas Halvorsen’s Viking Global dropped the largest investment of the “upper crust” of funds tracked by Insider Monkey, comprising close to $224.2 million in stock. Benjamin A. Smith’s fund, Laurion Capital Management, also cut its stock, about $27.6 million worth. These transactions are important to note, as aggregate hedge fund interest dropped by 6 funds heading into Q4.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Equitable Holdings, Inc. (NYSE:EQH) but similarly valued. We will take a look at Dynatrace, Inc. (NYSE:DT), Dr. Reddy’s Laboratories Limited (NYSE:RDY), Darden Restaurants, Inc. (NYSE:DRI), and RenaissanceRe Holdings Ltd. (NYSE:RNR). All of these stocks’ market caps resemble EQH’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
DT 35 725860 10
RDY 11 112891 -1
DRI 52 879489 19
RNR 30 675791 7
Average 32 598508 8.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 32 hedge funds with bullish positions and the average amount invested in these stocks was $599 million. That figure was $822 million in EQH’s case. Darden Restaurants, Inc. (NYSE:DRI) is the most popular stock in this table. On the other hand Dr. Reddy’s Laboratories Limited (NYSE:RDY) is the least popular one with only 11 bullish hedge fund positions. Equitable Holdings, Inc. (NYSE:EQH) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th and still beat the market by 15.5 percentage points. A small number of hedge funds were also right about betting on EQH as the stock returned 34.7% during the second quarter and outperformed the market by an even larger margin.

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