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Is Apartment Investment and Management Co. (AIV) Going to Burn These Hedge Funds?

With the first-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the second quarter. One of these stocks was Apartment Investment and Management Co. (NYSE:AIV).

Apartment Investment and Management Co. (NYSE:AIV) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 24 hedge funds’ portfolios at the end of the third quarter of 2019. At the end of this article we will also compare AIV to other stocks including Post Holdings Inc (NYSE:POST), DXC Technology Company (NYSE:DXC), and Assurant, Inc. (NYSE:AIZ) to get a better sense of its popularity.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Ken Heebner of Capital Growth Management

Ken Heebner of Capital Growth Management

Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. We’re going to take a peek at the recent hedge fund action regarding Apartment Investment and Management Co. (NYSE:AIV).

How have hedgies been trading Apartment Investment and Management Co. (NYSE:AIV)?

At Q3’s end, a total of 24 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the previous quarter. On the other hand, there were a total of 18 hedge funds with a bullish position in AIV a year ago. With the smart money’s sentiment swirling, there exists a few key hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).

AIV_dec2019

According to Insider Monkey’s hedge fund database, Renaissance Technologies has the biggest position in Apartment Investment and Management Co. (NYSE:AIV), worth close to $292.6 million, accounting for 0.2% of its total 13F portfolio. Sitting at the No. 2 spot is Balyasny Asset Management, led by Dmitry Balyasny, holding a $69.8 million position; 0.5% of its 13F portfolio is allocated to the company. Some other peers with similar optimism include David Harding’s Winton Capital Management, John Khoury’s Long Pond Capital and David E. Shaw’s D E Shaw. In terms of the portfolio weights assigned to each position Waterfront Capital Partners allocated the biggest weight to Apartment Investment and Management Co. (NYSE:AIV), around 3.87% of its portfolio. Long Pond Capital is also relatively very bullish on the stock, setting aside 1.43 percent of its 13F equity portfolio to AIV.

Seeing as Apartment Investment and Management Co. (NYSE:AIV) has experienced declining sentiment from hedge fund managers, it’s safe to say that there is a sect of money managers who were dropping their positions entirely by the end of the third quarter. At the top of the heap, John Overdeck and David Siegel’s Two Sigma Advisors cut the biggest stake of all the hedgies watched by Insider Monkey, comprising close to $26.5 million in stock, and Israel Englander’s Millennium Management was right behind this move, as the fund said goodbye to about $6.5 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Apartment Investment and Management Co. (NYSE:AIV) but similarly valued. These stocks are Post Holdings Inc (NYSE:POST), DXC Technology Company (NYSE:DXC), Assurant, Inc. (NYSE:AIZ), and Graco Inc. (NYSE:GGG). This group of stocks’ market valuations are closest to AIV’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
POST 28 1466400 2
DXC 34 1144765 -7
AIZ 27 905471 -2
GGG 19 187451 -5
Average 27 926022 -3

View table here if you experience formatting issues.

As you can see these stocks had an average of 27 hedge funds with bullish positions and the average amount invested in these stocks was $926 million. That figure was $659 million in AIV’s case. DXC Technology Company (NYSE:DXC) is the most popular stock in this table. On the other hand Graco Inc. (NYSE:GGG) is the least popular one with only 19 bullish hedge fund positions. Apartment Investment and Management Co. (NYSE:AIV) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately AIV wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); AIV investors were disappointed as the stock returned 3.9% during the first two months of the fourth quarter 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 70 percent of these stocks already outperformed the market in Q4.

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

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