Hedge Funds Are Dumping Allied World Assurance Co Holdings, AG. (NYSE:AWH) – First American Financial Corp (NYSE:FAF), Aspen Insurance Holdings Limited (NYSE:AHL)

Allied World Assurance Co Holdings, AG. (NYSE:AWH) was in 12 hedge funds’ portfolio at the end of the fourth quarter of 2012. AWH shareholders have witnessed a decrease in support from the world’s most elite money managers lately. There were 16 hedge funds in our database with AWH holdings at the end of the previous quarter.

In the eyes of most shareholders, hedge funds are viewed as unimportant, old financial vehicles of the past. While there are more than 8000 funds trading at the moment, we at Insider Monkey hone in on the top tier of this club, around 450 funds. Most estimates calculate that this group has its hands on the majority of the hedge fund industry’s total asset base, and by monitoring their highest performing investments, we have formulated a few investment strategies that have historically outstripped the market. Our small-cap hedge fund strategy outpaced the S&P 500 index by 18 percentage points per annum for a decade in our back tests, and since we’ve began to sharing our picks with our subscribers at the end of August 2012, we have topped the S&P 500 index by 25 percentage points in 6.5 month (explore the details and some picks here).

First American Financial Corp

Equally as key, positive insider trading sentiment is a second way to parse down the financial markets. There are lots of incentives for an insider to cut shares of his or her company, but only one, very obvious reason why they would buy. Several academic studies have demonstrated the impressive potential of this tactic if piggybackers know where to look (learn more here).

Consequently, let’s take a gander at the key action encompassing Allied World Assurance Co Holdings, AG. (NYSE:AWH).

What does the smart money think about Allied World Assurance Co Holdings, AG. (NYSE:AWH)?

Heading into 2013, a total of 12 of the hedge funds we track were long in this stock, a change of -25% from the third quarter. With hedgies’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were upping their holdings meaningfully.

When looking at the hedgies we track, Royce & Associates, managed by Chuck Royce, holds the biggest position in Allied World Assurance Co Holdings, AG. (NYSE:AWH). Royce & Associates has a $74 million position in the stock, comprising 0.2% of its 13F portfolio. On Royce & Associates’s heels is David Dreman of Dreman Value Management, with a $29 million position; 0% of its 13F portfolio is allocated to the company. Other hedge funds that hold long positions include Phill Gross and Robert Atchinson’s Adage Capital Management, Ken Griffin’s Citadel Investment Group and Israel Englander’s Millennium Management.

Since Allied World Assurance Co Holdings, AG. (NYSE:AWH) has witnessed declining sentiment from the aggregate hedge fund industry, logic holds that there lies a certain “tier” of money managers who sold off their entire stakes at the end of the year. It’s worth mentioning that Cliff Asness’s AQR Capital Management cut the largest investment of the 450+ funds we key on, valued at close to $15 million in stock.. D. E. Shaw’s fund, D E Shaw, also cut its stock, about $4 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest fell by 4 funds at the end of the year.

Insider trading activity in Allied World Assurance Co Holdings, AG. (NYSE:AWH)

Insider purchases made by high-level executives is particularly usable when the company we’re looking at has seen transactions within the past 180 days. Over the last six-month time frame, Allied World Assurance Co Holdings, AG. (NYSE:AWH) has seen zero unique insiders buying, and 2 insider sales (see the details of insider trades here).

Let’s also take a look at hedge fund and insider activity in other stocks similar to Allied World Assurance Co Holdings, AG. (NYSE:AWH). These stocks are Alterra Capital Holdings Ltd (NASDAQ:ALTE), ProAssurance Corporation (NYSE:PRA), White Mountains Insurance Group Ltd (NYSE:WTM), First American Financial Corp (NYSE:FAF), and Aspen Insurance Holdings Limited (NYSE:AHL). This group of stocks are the members of the property & casualty insurance industry and their market caps are closest to AWH’s market cap.

Company Name # of Hedge Funds # of Insiders Buying # of Insiders Selling
Alterra Capital Holdings Ltd (NASDAQ:ALTE) 16 0 2
ProAssurance Corporation (NYSE:PRA) 19 0 0
White Mountains Insurance Group Ltd (NYSE:WTM) 11 1 1
First American Financial Corp (NYSE:FAF) 28 0 5
Aspen Insurance Holdings Limited (NYSE:AHL) 21 0 5

With the returns shown by Insider Monkey’s studies, retail investors must always pay attention to hedge fund and insider trading sentiment, and Allied World Assurance Co Holdings, AG. (NYSE:AWH) is no exception.

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