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Hedge Funds Are Dipping Their Toes Back Into Athene Holding Ltd. (ATH)

At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (see why hell is coming). We reversed our stance on March 25th after seeing unprecedented fiscal and monetary stimulus unleashed by the Fed and the Congress. This is the perfect market for stock pickers, now that the stocks are fully valued again. In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Athene Holding Ltd. (NYSE:ATH) at the end of the second quarter and determine whether the smart money was really smart about this stock.

Athene Holding Ltd. (NYSE:ATH) was in 33 hedge funds’ portfolios at the end of June. The all time high for this statistics is 50. ATH investors should be aware of an increase in hedge fund sentiment in recent months. There were 32 hedge funds in our database with ATH holdings at the end of March. Our calculations also showed that ATH isn’t among the 30 most popular stocks among hedge funds (click for Q2 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.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 56 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

Christian Leone of Luxor Capital Group

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, this “mom” trader turned $2000 into $2 million within 2 years. So, we are checking out her best trade idea of the month. Cannabis stocks are roaring back in 2020, which is why we are also checking out this under-the-radar stock. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Keeping this in mind let’s review the recent hedge fund action encompassing Athene Holding Ltd. (NYSE:ATH).

How have hedgies been trading Athene Holding Ltd. (NYSE:ATH)?

At the end of June, a total of 33 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 3% from the first quarter of 2020. On the other hand, there were a total of 39 hedge funds with a bullish position in ATH a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Samlyn Capital held the most valuable stake in Athene Holding Ltd. (NYSE:ATH), which was worth $194.6 million at the end of the third quarter. On the second spot was Luxor Capital Group which amassed $90.3 million worth of shares. Lakewood Capital Management, Citadel Investment Group, and GMT Capital 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 OCO Capital Partners allocated the biggest weight to Athene Holding Ltd. (NYSE:ATH), around 32.09% of its 13F portfolio. Meru Capital is also relatively very bullish on the stock, designating 12.55 percent of its 13F equity portfolio to ATH.

As aggregate interest increased, key hedge funds have jumped into Athene Holding Ltd. (NYSE:ATH) headfirst. Balyasny Asset Management, managed by Dmitry Balyasny, established the largest position in Athene Holding Ltd. (NYSE:ATH). Balyasny Asset Management had $17.6 million invested in the company at the end of the quarter. Clint Murray’s Lodge Hill Capital also initiated a $7.5 million position during the quarter. The other funds with new positions in the stock are Daniel Johnson’s Gillson Capital, Jonathan Berger’s Birch Grove Capital, and Gregg Moskowitz’s Interval Partners.

Let’s check out hedge fund activity in other stocks similar to Athene Holding Ltd. (NYSE:ATH). We will take a look at Elbit Systems Ltd. (NASDAQ:ESLT), Robert Half International Inc. (NYSE:RHI), Reliance Steel & Aluminum Co. (NYSE:RS), Morningstar, Inc. (NASDAQ:MORN), Aegon N.V. (NYSE:AEG), CF Industries Holdings, Inc. (NYSE:CF), and AECOM (NYSE:ACM). This group of stocks’ market valuations resemble ATH’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ESLT 4 11024 -2
RHI 28 300880 2
RS 27 221183 4
MORN 20 292962 7
AEG 4 16423 0
CF 37 547941 3
ACM 38 664429 -1
Average 22.6 293549 1.9

View table here if you experience formatting issues.

As you can see these stocks had an average of 22.6 hedge funds with bullish positions and the average amount invested in these stocks was $294 million. That figure was $765 million in ATH’s case. AECOM (NYSE:ACM) is the most popular stock in this table. On the other hand Elbit Systems Ltd. (NASDAQ:ESLT) is the least popular one with only 4 bullish hedge fund positions. Athene Holding Ltd. (NYSE:ATH) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ATH is 68.4. 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 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 33% in 2020 through the end of August and still beat the market by 23.2 percentage points. Hedge funds were also right about betting on ATH, though not to the same extent, as the stock returned 17.2% since the end of June and outperformed the market as well.

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