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Hedge Funds Cashing Out Of Axis Capital Holdings Limited (AXS)

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. In this article we look at what those investors think of Axis Capital Holdings Limited (NYSE:AXS).

Axis Capital Holdings Limited (NYSE:AXS) shareholders have witnessed a decrease in hedge fund interest lately. Our calculations also showed that AXS 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.

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 51 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.

Richard Pzena - Pzena Investment Management

Richard S. Pzena of Pzena Investment Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s take a gander at the key hedge fund action encompassing Axis Capital Holdings Limited (NYSE:AXS).

What have hedge funds been doing with Axis Capital Holdings Limited (NYSE:AXS)?

Heading into the second quarter of 2020, a total of 32 of the hedge funds tracked by Insider Monkey were long this stock, a change of -6% from one quarter earlier. By comparison, 31 hedge funds held shares or bullish call options in AXS a year ago. With the smart money’s sentiment swirling, there exists a select group of noteworthy hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).

Among these funds, Pzena Investment Management held the most valuable stake in Axis Capital Holdings Limited (NYSE:AXS), which was worth $197.8 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $104.1 million worth of shares. Samlyn Capital, Paradice Investment Management, 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 Paradice Investment Management allocated the biggest weight to Axis Capital Holdings Limited (NYSE:AXS), around 6.83% of its 13F portfolio. BlueMar Capital Management is also relatively very bullish on the stock, earmarking 3.01 percent of its 13F equity portfolio to AXS.

Seeing as Axis Capital Holdings Limited (NYSE:AXS) has faced declining sentiment from the entirety of the hedge funds we track, it’s safe to say that there were a few hedge funds that elected to cut their full holdings last quarter. It’s worth mentioning that Dmitry Balyasny’s Balyasny Asset Management dropped the largest investment of the 750 funds tracked by Insider Monkey, comprising an estimated $39.5 million in stock, and Phill Gross and Robert Atchinson’s Adage Capital Management was right behind this move, as the fund sold off about $26.4 million worth. These bearish behaviors are interesting, as total hedge fund interest dropped by 2 funds last quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Axis Capital Holdings Limited (NYSE:AXS) but similarly valued. We will take a look at Cyberark Software Ltd (NASDAQ:CYBR), New Jersey Resources Corp (NYSE:NJR), Gerdau SA (NYSE:GGB), and National Fuel Gas Company (NYSE:NFG). This group of stocks’ market values are similar to AXS’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CYBR 14 133983 -6
NJR 14 36464 -6
GGB 12 88520 5
NFG 18 104176 -8
Average 14.5 90786 -3.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 14.5 hedge funds with bullish positions and the average amount invested in these stocks was $91 million. That figure was $594 million in AXS’s case. National Fuel Gas Company (NYSE:NFG) is the most popular stock in this table. On the other hand Gerdau SA (NYSE:GGB) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Axis Capital Holdings Limited (NYSE:AXS) is more popular among hedge funds. 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 8.3% in 2020 through the end of May and still beat the market by 13.2 percentage points. Unfortunately AXS wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on AXS were disappointed as the stock returned -2.9% during the second quarter (through the end of May) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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