Before we spend days researching a stock idea we’d like to take a look at how hedge funds and billionaire investors recently traded that stock. S&P 500 Index returned about 7.6% during the last 12 months ending November 21, 2016. Most investors don’t notice that less than 49% of the stocks in the index outperformed the index. This means you (or a monkey throwing a dart) have less than an even chance of beating the market by randomly picking a stock. On the other hand, the top 30 mid-cap stocks among the best performing hedge funds had an average return of 18% during the same period. Hedge funds had bad stock picks like everyone else. We are sure you have read about their worst picks, like Valeant, in the media over the past year. So, taking cues from hedge funds isn’t a foolproof strategy, but it seems to work on average. In this article, we will take a look at what hedge funds think about AFLAC Incorporated (NYSE:AFL).
Is AFLAC Incorporated (NYSE:AFL) going to take off soon? Prominent investors are betting on the stock. The number of long hedge fund bets rose by 2 in recent months. At the end of this article we will also compare AFL to other stocks including Canadian Imperial Bank of Commerce (USA) (NYSE:CM), Waste Management, Inc. (NYSE:WM), and The Blackstone Group L.P. (NYSE:BX) to get a better sense of its popularity.
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
How have hedgies been trading AFLAC Incorporated (NYSE:AFL)?
At the end of the third quarter, a total of 29 of the hedge funds tracked by Insider Monkey held long positions in this stock, up by 7% from the previous quarter, pushing to a yearly high. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Cliff Asness’ AQR Capital Management has the largest position in AFLAC Incorporated (NYSE:AFL), worth close to $172.5 million. The second largest stake is held by John W. Rogers of Ariel Investments, with a $117.5 million position; the fund has 1.4% of its 13F portfolio invested in the stock. Remaining peers that hold long positions consist of Daniel Bubis’ Tetrem Capital Management, Phill Gross and Robert Atchinson’s Adage Capital Management, and David Harding’s Winton Capital Management.
As aggregate interest increased, key hedge funds were leading the bulls’ herd. Citadel Investment Group, managed by Ken Griffin, created the biggest call position in AFLAC Incorporated (NYSE:AFL). The fund reportedly had $22.2 million invested in the company at the end of the quarter. D E Shaw also made a $1.9 million investment in the stock during the quarter. The other funds with new positions in the stock are Alec Litowitz and Ross Laser’s Magnetar Capital, Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners, and Joe DiMenna’s ZWEIG DIMENNA PARTNERS.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as AFLAC Incorporated (NYSE:AFL) but similarly valued. These stocks are Canadian Imperial Bank of Commerce (USA) (NYSE:CM), Waste Management, Inc. (NYSE:WM), The Blackstone Group L.P. (NYSE:BX), and Activision Blizzard, Inc. (NASDAQ:ATVI). This group of stocks’ market values are closest to AFL’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 37 hedge funds with bullish positions and the average amount invested in these stocks was $1.76 billion. That figure was just $508 million in AFL’s case. Activision Blizzard, Inc. (NASDAQ:ATVI) is the most popular stock in this table. On the other hand Canadian Imperial Bank of Commerce (USA) (NYSE:CM) is the least popular one with only 18 bullish hedge fund positions. AFLAC Incorporated (NYSE:AFL) 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. In this regard ATVI might be a better candidate to consider a long position in.