As we already know from media reports and hedge fund investor letters, hedge funds delivered their best returns in a decade. Most investors who decided to stick with hedge funds after a rough 2018 recouped their losses by the end of the second quarter. We get to see hedge funds’ thoughts towards the market and individual stocks by aggregating their quarterly portfolio movements and reading their investor letters. In this article, we will particularly take a look at what hedge funds think about Axis Capital Holdings Limited (NYSE:AXS).
Axis Capital Holdings Limited (NYSE:AXS) was in 27 hedge funds’ portfolios at the end of the second quarter of 2019. AXS shareholders have witnessed a decrease in support from the world’s most elite money managers of late. There were 31 hedge funds in our database with AXS positions at the end of the previous quarter. Our calculations also showed that AXS isn’t among the 30 most popular stocks among hedge funds.
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 market by 40 percentage points since May 2014 through May 30, 2019 (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.
Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s check out the latest hedge fund action surrounding Axis Capital Holdings Limited (NYSE:AXS).
What does smart money think about Axis Capital Holdings Limited (NYSE:AXS)?
At the end of the second quarter, a total of 27 of the hedge funds tracked by Insider Monkey were long this stock, a change of -13% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in AXS over the last 16 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Axis Capital Holdings Limited (NYSE:AXS) was held by Pzena Investment Management, which reported holding $278.3 million worth of stock at the end of March. It was followed by Renaissance Technologies with a $151.9 million position. Other investors bullish on the company included AQR Capital Management, Millennium Management, and Balyasny Asset Management.
Since Axis Capital Holdings Limited (NYSE:AXS) has experienced declining sentiment from hedge fund managers, it’s easy to see that there were a few hedge funds that elected to cut their positions entirely last quarter. Interestingly, Dmitry Balyasny’s Balyasny Asset Management cut the biggest investment of all the hedgies followed by Insider Monkey, valued at an estimated $14.2 million in stock, and Anand Parekh’s Alyeska Investment Group was right behind this move, as the fund said goodbye to about $4 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest dropped by 4 funds last quarter.
Let’s now take a look at hedge fund activity in other stocks similar to Axis Capital Holdings Limited (NYSE:AXS). We will take a look at The Hanover Insurance Group, Inc. (NYSE:THG), Williams-Sonoma, Inc. (NYSE:WSM), Turkcell Iletisim Hizmetleri A.S. (NYSE:TKC), and Crane Co. (NYSE:CR). All of these stocks’ market caps are similar to AXS’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $234 million. That figure was $822 million in AXS’s case. Williams-Sonoma, Inc. (NYSE:WSM) is the most popular stock in this table. On the other hand Turkcell Iletisim Hizmetleri A.S. (NYSE:TKC) is the least popular one with only 7 bullish hedge fund positions. Axis Capital Holdings Limited (NYSE:AXS) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks (view the video below) among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Hedge funds were also right about betting on AXS as the stock returned 11.9% during the third quarter and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.