Is American International Group Inc (AIG) Going to Burn These Hedge Funds?

Many investors like Carl Icahn or Stan Druckenmiller have been saying for a while now that the current market is overvalued due to a low interest rate environment that leads to companies swapping their equity for debt and focusing mostly on short-term performance such as beating the quarterly earnings estimates. In the third quarter, many investors lost money due to unpredictable events such as the concerns over Valeant’s drug pricing policy that led to an overall drop among pharma stocks. Nevertheless, many of the stocks that tanked in the third quarter still sport strong fundamentals and their decline was more related to the general market sentiment rather than their individual performance and hedge funds kept their bullish stance. In this article we will find out how hedge fund sentiment to American International Group Inc (NYSE:AIG) changed recently.

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American International Group Inc (NYSE:AIG) was in 94 hedge funds’ portfolio at the end of the third quarter of 2015. AIG shareholders have witnessed a decrease in hedge fund sentiment lately. There were 99 hedge funds in our database with AIG positions at the end of the previous quarter.

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Today there are a large number of methods market participants employ to value publicly traded companies. A couple of the most useful methods are hedge fund and insider trading moves. Hedge fund experts at Insider Monkey have shown that, historically, those who follow the best picks of the best money managers can outclass the broader indices by a solid amount (see the details here).

Now, we’re going to check out the fresh action encompassing American International Group Inc (NYSE:AIG).

How have hedgies been trading American International Group Inc (NYSE:AIG)?

At the end of the third quarter, a total of 94 of the hedge funds tracked by Insider Monkey were bullish in this stock, a change of -5% from the previous quarter. With hedge funds’ sentiment swirling, there exists a select group of notable hedge fund managers who were boosting their stakes meaningfully.

According to hedge fund experts at Insider Monkey, Paulson & Co, managed by John Paulson, holds the most valuable position in American International Group Inc (NYSE:AIG). Paulson & Co has a $829.8 million position in the stock, comprising 4.3% of its 13F portfolio. On Paulson & Co’s heels is Perry Capital, managed by Richard Perry, which held a $552 million position; the fund has 21.8% of its 13F portfolio invested in the stock. Remaining peers that hold long positions contain Michael Lowenstein’s Kensico Capital, Bruce Berkowitz’s Fairholme (FAIRX) and Robert Rodriguez and Steven Romick’s First Pacific Advisors LLC.

Since American International Group Inc (NYSE:AIG) has experienced a decline in interest from the entirety of the hedge funds we track, it’s safe to say that there lies a certain “tier” of fund managers who were dropping their positions entirely heading into Q4. At the top of the heap, Kenneth Mario Garschina’s Mason Capital Management said goodbye to the largest investment of the 700 funds monitored by Insider Monkey, totaling close to $278.4 million in stock. Dan Loeb’s fund, Third Point, also said goodbye to its stock, about $216.4 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest dropped by 5 funds heading into Q4.

Let’s also review hedge fund activity in other stocks similar to American International Group Inc (NYSE:AIG). These stocks are Toronto-Dominion Bank (USA) (NYSE:TD), China Petroleum & Chemical Corp (ADR) (NYSE:SNP), U.S. Bancorp (NYSE:USB), and UBS AG (USA) (NYSE:UBS). This group of stocks’ market caps resemble AIG’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TD 16 342207 -3
SNP 7 21003 -2
USB 43 5103606 0
UBS 13 792819 -1

With the results shown by Insider Monkey’s strategies, retail investors should always pay attention to hedge fund activity, and American International Group Inc (NYSE:AIG) is no exception. Smart money is still bullish on the stock, despite the decline in the number of funds with long positions, but one should look into the company with more detail before making their move.