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

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 September 30, so let’s proceed with the discussion of the hedge fund sentiment on Athene Holding Ltd. (NYSE:ATH).

Is ATH a good stock to buy? Hedge funds were getting less bullish. The number of long hedge fund bets went down by 2 recently. Athene Holding Ltd. (NYSE:ATH) was in 31 hedge funds’ portfolios at the end of September. The all time high for this statistic is 50. Our calculations also showed that ATH 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).

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

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 66 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

Emanuel J. Friedman

Emanuel Friedman of EJF Capital

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 let’s take a peek at the recent hedge fund action regarding Athene Holding Ltd. (NYSE:ATH).

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

At third quarter’s end, a total of 31 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -6% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards ATH over the last 21 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).

More specifically, Samlyn Capital was the largest shareholder of Athene Holding Ltd. (NYSE:ATH), with a stake worth $273.6 million reported as of the end of September. Trailing Samlyn Capital was Luxor Capital Group, which amassed a stake valued at $158.9 million. Arrowstreet Capital, Lakewood Capital Management, and 40 North 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 OCO Capital Partners allocated the biggest weight to Athene Holding Ltd. (NYSE:ATH), around 33.9% of its 13F portfolio. Meru Capital is also relatively very bullish on the stock, setting aside 15.37 percent of its 13F equity portfolio to ATH.

Judging by the fact that Athene Holding Ltd. (NYSE:ATH) has witnessed a decline in interest from the aggregate hedge fund industry, it’s safe to say that there lies a certain “tier” of fund managers who sold off their positions entirely heading into Q4. At the top of the heap, Chase Coleman’s Tiger Global Management LLC dumped the biggest position of the “upper crust” of funds tracked by Insider Monkey, worth an estimated $44.9 million in stock. Ike Kier and Ilya Zaides’s fund, KG Funds Management, also said goodbye to its stock, about $23.9 million worth. These transactions are intriguing to say the least, as total hedge fund interest dropped by 2 funds heading into Q4.

Let’s go over hedge fund activity in other stocks similar to Athene Holding Ltd. (NYSE:ATH). These stocks are Adaptive Biotechnologies Corporation (NASDAQ:ADPT), CF Industries Holdings, Inc. (NYSE:CF), Casey’s General Stores, Inc. (NASDAQ:CASY), ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD), Tata Motors Limited (NYSE:TTM), Albertsons Companies, Inc. (NYSE:ACI), and Lear Corporation (NYSE:LEA). This group of stocks’ market valuations are closest to ATH’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ADPT 26 2671964 -2
CF 34 586641 -3
CASY 21 133183 -2
ACAD 41 2412028 -3
TTM 10 34390 1
ACI 26 2159342 -4
LEA 44 975002 3
Average 28.9 1281793 -1.4

View table here if you experience formatting issues.

As you can see these stocks had an average of 28.9 hedge funds with bullish positions and the average amount invested in these stocks was $1282 million. That figure was $853 million in ATH’s case. Lear Corporation (NYSE:LEA) is the most popular stock in this table. On the other hand Tata Motors Limited (NYSE:TTM) is the least popular one with only 10 bullish hedge fund positions. Athene Holding Ltd. (NYSE:ATH) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ATH is 52.5. 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 ATH as the stock returned 23.3% 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.