Is AFL A Good Stock To Buy According To Hedge Funds?

Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren’t timid and registered double digit market beating gains. Financials, energy and industrial stocks aren’t doing great but many of the stocks that delivered strong returns since March are still going very strong and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment to AFLAC Incorporated (NYSE:AFL) changed recently.

Is AFL a good stock to buy? AFLAC Incorporated (NYSE:AFL) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 34 hedge funds’ portfolios at the end of the third quarter of 2020. Our calculations also showed that AFL isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). At the end of this article we will also compare AFL to other stocks including Stanley Black & Decker, Inc. (NYSE:SWK), Fresenius Medical Care AG & Co. (NYSE:FMS), and Fastenal Company (NASDAQ:FAST) to get a better sense of its popularity.

Video: Watch our video about the top 5 most popular hedge fund stocks.

In the financial world there are tons of gauges stock market investors employ to analyze stocks. A couple of the most under-the-radar gauges are hedge fund and insider trading signals. Our experts have shown that, historically, those who follow the best picks of the elite investment managers can outclass the broader indices by a significant margin (see the details here).


Ken Griffin of Citadel Investment GroupKen Griffin

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Now we’re going to analyze the new hedge fund action regarding AFLAC Incorporated (NYSE:AFL).

Do Hedge Funds Think AFL Is A Good Stock To Buy Now?

At the end of the third quarter, a total of 34 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. By comparison, 31 hedge funds held shares or bullish call options in AFL a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is AFL A Good Stock To Buy?

Among these funds, Citadel Investment Group held the most valuable stake in AFLAC Incorporated (NYSE:AFL), which was worth $122 million at the end of the third quarter. On the second spot was D E Shaw which amassed $120 million worth of shares. Ariel Investments, Renaissance Technologies, and Adage 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 Prospector Partners allocated the biggest weight to AFLAC Incorporated (NYSE:AFL), around 2.04% of its 13F portfolio. Ariel Investments is also relatively very bullish on the stock, earmarking 0.82 percent of its 13F equity portfolio to AFL.

Due to the fact that AFLAC Incorporated (NYSE:AFL) has experienced falling interest from the entirety of the hedge funds we track, logic holds that there was a specific group of hedgies that elected to cut their entire stakes in the third quarter. At the top of the heap, Peter Seuss’s Prana Capital Management dropped the biggest position of the “upper crust” of funds followed by Insider Monkey, valued at about $48.4 million in stock. Daniel Johnson’s fund, Gillson Capital, also sold off its stock, about $6.4 million worth. These transactions are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s now take a look at hedge fund activity in other stocks similar to AFLAC Incorporated (NYSE:AFL). These stocks are Stanley Black & Decker, Inc. (NYSE:SWK), Fresenius Medical Care AG & Co. (NYSE:FMS), Fastenal Company (NASDAQ:FAST), McCormick & Company, Incorporated (NYSE:MKC), Archer Daniels Midland Company (NYSE:ADM), BeiGene, Ltd. (NASDAQ:BGNE), and Liberty Broadband Corp (NASDAQ:LBRDA). This group of stocks’ market caps are similar to AFL’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SWK 38 786276 5
FMS 9 14151 3
FAST 38 700349 4
MKC 37 315538 5
ADM 26 673303 -2
BGNE 13 5585118 0
LBRDA 25 862989 3
Average 26.6 1276818 2.6

View table here if you experience formatting issues.

As you can see these stocks had an average of 26.6 hedge funds with bullish positions and the average amount invested in these stocks was $1277 million. That figure was $479 million in AFL’s case. Stanley Black & Decker, Inc. (NYSE:SWK) is the most popular stock in this table. On the other hand Fresenius Medical Care AG & Co. (NYSE:FMS) is the least popular one with only 9 bullish hedge fund positions. AFLAC Incorporated (NYSE:AFL) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for AFL is 78.1. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 33.3% in 2020 through December 18th and still beat the market by 16.4 percentage points. Hedge funds were also right about betting on AFL as the stock returned 21.5% since the end of Q3 (through 12/18) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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