Do Hedge Funds Love Everest Re Group Ltd (RE)?

In this article you are going to find out whether hedge funds think Everest Re Group Ltd (NYSE:RE) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Is Everest Re Group Ltd (NYSE:RE) a splendid investment now? The smart money was buying. The number of long hedge fund bets inched up by 3 lately. Everest Re Group Ltd (NYSE:RE) was in 32 hedge funds’ portfolios at the end of March. The all time high for this statistic is 36. Our calculations also showed that RE isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 29 hedge funds in our database with RE positions at the end of the fourth 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. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

Mason Hawkins of Southeastern Asset Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV 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. Keeping this in mind we’re going to take a gander at the recent hedge fund action regarding Everest Re Group Ltd (NYSE:RE).

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

Heading into the second quarter of 2021, a total of 32 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 10% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards RE over the last 23 quarters. With hedge funds’ sentiment swirling, there exists a select group of notable hedge fund managers who were upping their stakes substantially (or already accumulated large positions).

More specifically, AQR Capital Management was the largest shareholder of Everest Re Group Ltd (NYSE:RE), with a stake worth $155.2 million reported as of the end of March. Trailing AQR Capital Management was Southeastern Asset Management, which amassed a stake valued at $99.4 million. Adage Capital Management, Polar Capital, and Renaissance Technologies 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 Southeastern Asset Management allocated the biggest weight to Everest Re Group Ltd (NYSE:RE), around 2.13% of its 13F portfolio. Te Ahumairangi Investment Management is also relatively very bullish on the stock, designating 1.61 percent of its 13F equity portfolio to RE.

Consequently, some big names have been driving this bullishness. Gillson Capital, managed by Daniel Johnson, initiated the largest position in Everest Re Group Ltd (NYSE:RE). Gillson Capital had $7.6 million invested in the company at the end of the quarter. Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors also made a $3.8 million investment in the stock during the quarter. The following funds were also among the new RE investors: D. E. Shaw’s D E Shaw, Alec Litowitz and Ross Laser’s Magnetar Capital, and Paul Marshall and Ian Wace’s Marshall Wace LLP.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Everest Re Group Ltd (NYSE:RE) but similarly valued. These stocks are Formula One Group (NASDAQ:FWONK), PRA Health Sciences Inc (NASDAQ:PRAH), Gaming and Leisure Properties Inc (NASDAQ:GLPI), Henry Schein, Inc. (NASDAQ:HSIC), Penumbra Inc (NYSE:PEN), American Financial Group, Inc. (NYSE:AFG), and MGM Growth Properties LLC (NYSE:MGP). This group of stocks’ market valuations match RE’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
FWONK 37 1672098 -5
PRAH 35 1066188 12
GLPI 28 594880 -5
HSIC 32 1262137 -1
PEN 27 399617 7
AFG 21 191538 -3
MGP 34 592102 5
Average 30.6 825509 1.4

View table here if you experience formatting issues.

As you can see these stocks had an average of 30.6 hedge funds with bullish positions and the average amount invested in these stocks was $826 million. That figure was $521 million in RE’s case. Formula One Group (NASDAQ:FWONK) is the most popular stock in this table. On the other hand American Financial Group, Inc. (NYSE:AFG) is the least popular one with only 21 bullish hedge fund positions. Everest Re Group Ltd (NYSE:RE) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for RE is 69. 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 22.8% in 2021 through July 2nd and beat the market again by 6 percentage points. Unfortunately RE wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on RE were disappointed as the stock returned 2.4% since the end of March (through 7/2) 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.

Follow Everest Group Ltd. (NYSE:EG)

Suggested Articles:

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