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Hedge Funds Were Getting Burned By AEGON N.V. (AEG) Before The Coronavirus

We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (10 coronavirus predictions).

In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended December 31, so let’s proceed with the discussion of the hedge fund sentiment on AEGON N.V. (NYSE:AEG).

Is AEGON N.V. (NYSE:AEG) a buy right now? Prominent investors are taking a bearish view. The number of long hedge fund positions were trimmed by 1 recently. Our calculations also showed that AEG isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings). AEG was in 6 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 7 hedge funds in our database with AEG positions at the end of the previous quarter.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by more than 41 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

John Overdeck of Two Sigma

John Overdeck of Two Sigma Advisors

We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to view the key hedge fund action encompassing AEGON N.V. (NYSE:AEG).

Hedge fund activity in AEGON N.V. (NYSE:AEG)

Heading into the first quarter of 2020, a total of 6 of the hedge funds tracked by Insider Monkey were long this stock, a change of -14% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards AEG over the last 18 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).

More specifically, Arrowstreet Capital was the largest shareholder of AEGON N.V. (NYSE:AEG), with a stake worth $26.2 million reported as of the end of September. Trailing Arrowstreet Capital was Citadel Investment Group, which amassed a stake valued at $1.7 million. Two Sigma Advisors, Millennium Management, and Paloma Partners 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 Arrowstreet Capital allocated the biggest weight to AEGON N.V. (NYSE:AEG), around 0.06% of its 13F portfolio. Two Sigma Advisors is also relatively very bullish on the stock, designating 0.0029 percent of its 13F equity portfolio to AEG.

Since AEGON N.V. (NYSE:AEG) has experienced falling interest from the entirety of the hedge funds we track, we can see that there is a sect of hedgies that elected to cut their positions entirely by the end of the third quarter. At the top of the heap, Minhua Zhang’s Weld Capital Management dropped the biggest position of the “upper crust” of funds watched by Insider Monkey, totaling about $0.3 million in call options, and Ken Griffin’s Citadel Investment Group was right behind this move, as the fund cut about $0.1 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest was cut by 1 funds by the end of the third quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as AEGON N.V. (NYSE:AEG) but similarly valued. We will take a look at Fortune Brands Home & Security Inc (NYSE:FBHS), Mobile TeleSystems PJSC (NYSE:MBT), WEX Inc (NYSE:WEX), and Guidewire Software Inc (NYSE:GWRE). All of these stocks’ market caps are closest to AEG’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
FBHS 34 561867 0
MBT 13 478752 -1
WEX 25 393579 -1
GWRE 32 742137 8
Average 26 544084 1.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 26 hedge funds with bullish positions and the average amount invested in these stocks was $544 million. That figure was $30 million in AEG’s case. Fortune Brands Home & Security Inc (NYSE:FBHS) is the most popular stock in this table. On the other hand Mobile TeleSystems OJSC (NYSE:MBT) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks AEGON N.V. (NYSE:AEG) is even less popular than MBT. Hedge funds dodged a bullet by taking a bearish stance towards AEG. Our calculations showed that the top 20 most popular hedge fund stocks returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 22.3% in 2020 through March 16th but managed to beat the market by 3.2 percentage points. Unfortunately AEG wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); AEG investors were disappointed as the stock returned -58.5% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in Q1.
5 Most Popular Stocks Among Hedge Funds
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.

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