If you are looking for the best ideas for your portfolio you may want to consider some of Greenlight Capital’s top stock picks. Greenlight Capital, an investment management firm, is short on Assured Guaranty Ltd (NYSE:AGO) stock. In its Q4 2019 investor letter – you can download a copy here – the firm discussed its investment thesis on Assured Guaranty Ltd (NYSE:AGO) stock. Assured Guaranty Ltd (NYSE:AGO) is an insurance company. The stock is down 53.5% since the Greenlight Capital’s pitch in January 2020, which suggests the investment firm was right in its decision. On a year-to-date basis, Assured Guaranty Ltd (NYSE:AGO) stock has fallen by 52.9%.
On January 21, 2020, Greenlight Capital had released its Q4 2019 Investor Letter. Greenlight Capital said that Assured Guaranty Ltd (NYSE:AGO) faces risks of insuring large and long term issuances. This isn’t the first time Greenlight Capital talked about Assured Guaranty Ltd (NYSE:AGO) stock. The investment firm has been a long time Assured Guaranty Ltd (NYSE:AGO) bearish. A year ago we shared Greenlight Capital’s bearish Assured Guaranty Ltd (NYSE:AGO) thesis in this article.
In 2019, the Greenlight Capital Fund recorded a return of 13.8% as compared to 31.5% of the S&P 500 Index.
Let’s take a look at comments made by Greenlight Capital about Assured Guaranty Ltd (NYSE:AGO) in the letter.
“AGO is a financial guarantor. In addition to insuring many large, long-term issuances in Chicago, Illinois and New Jersey that may prove problematic, AGO is already responsible for billions of dollars of defaulted Puerto Rico debt. We believe AGO has set aside inadequate loss reserves for its Puerto Rico exposure compared to what bond markets and our analysis suggest will be sizable losses. This year the Financial Oversight & Management Board for Puerto Rico, which has been empowered to set fiscal policy and propose a plan of adjustment for the Commonwealth, proposed a plan (subject to further negotiation and litigation) that would impart losses consistent with our analysis. Were AGO to own up to the probable losses, we believe it would become apparent to market participants that the shares are overvalued. This may also prompt insurance regulators to require AGO to cease releasing capital to fund its aggressive share buyback and instead retain capital to protect the bond investors who rely on AGO’s insurance. As is, AGO is presently spending far in excess of its net income on share repurchases and dividends. In 2020, we expect that gap to widen further, if the buyback persists. Earlier in this investment, we hedged part of our risk by buying Puerto Rico general obligation bonds at low levels. In 2019, we sold the bonds at a profit, which mitigated part of our exposure to AGO’s 30% advance in 2019.”
In Q1 2020, the number of bullish hedge fund positions on Assured Guaranty Ltd (NYSE:AGO) stock decreased by about 15% from the previous quarter (see the chart here), so a number of other hedge fund managers seem to agree with Assured Guaranty’s downside potential. Our calculations showed that Assured Guaranty Ltd (NYSE:AGO) isn’t ranked among the 30 most popular stocks among hedge funds.
The top 10 stocks among hedge funds returned 185% since the end of 2014 and outperformed the S&P 500 Index ETFs by more than 109 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds’ poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of dumb S&P 500 ETFs. Below you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.
Video: Top 5 Stocks Among Hedge Funds
At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. You can subscribe to our free enewsletter below to receive our stories in your inbox:
Disclosure: None. This article is originally published at Insider Monkey.