Were Hedge Funds Right About American International Group (AIG)?

We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).

In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The 800+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the fourth quarter, which unveil their equity positions as of December 31. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards American International Group Inc (NYSE:AIG).

American International Group Inc (NYSE:AIG) investors should be aware of a decrease in hedge fund sentiment recently. Our calculations also showed that AIG isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by more than 41 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Andreas Halvorsen

Andreas Halvorsen of Viking Global

Keeping this in mind we’re going to check out the fresh hedge fund action surrounding American International Group Inc (NYSE:AIG).

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

At Q4’s end, a total of 52 of the hedge funds tracked by Insider Monkey were long this stock, a change of -2% from the previous quarter. On the other hand, there were a total of 39 hedge funds with a bullish position in AIG a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).

More specifically, First Pacific Advisors LLC was the largest shareholder of American International Group Inc (NYSE:AIG), with a stake worth $680.8 million reported as of the end of September. Trailing First Pacific Advisors LLC was Pzena Investment Management, which amassed a stake valued at $550.1 million. Diamond Hill Capital, Levin Easterly Partners, and Balyasny Asset 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 Spindletop Capital allocated the biggest weight to American International Group Inc (NYSE:AIG), around 13.31% of its 13F portfolio. Capital Returns Management is also relatively very bullish on the stock, designating 8.29 percent of its 13F equity portfolio to AIG.

Judging by the fact that American International Group Inc (NYSE:AIG) has faced bearish sentiment from the smart money, it’s safe to say that there exists a select few money managers that decided to sell off their positions entirely heading into Q4. Interestingly, Michael Moriarty’s Teewinot Capital Advisers cut the largest position of the 750 funds tracked by Insider Monkey, valued at an estimated $6.3 million in stock, and Anand Parekh’s Alyeska Investment Group was right behind this move, as the fund dumped about $6.2 million worth. These transactions are interesting, as aggregate hedge fund interest dropped by 1 funds heading into Q4.

Let’s now review hedge fund activity in other stocks similar to American International Group Inc (NYSE:AIG). These stocks are Exelon Corporation (NASDAQ:EXC), Pinduoduo Inc. (NASDAQ:PDD), Koninklijke Philips NV (NYSE:PHG), and Baidu, Inc. (NASDAQ:BIDU). This group of stocks’ market caps match AIG’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
EXC 36 1822287 -2
PDD 32 1682011 1
PHG 9 179950 1
BIDU 60 2832866 12
Average 34.25 1629279 3

View table here if you experience formatting issues.

As you can see these stocks had an average of 34.25 hedge funds with bullish positions and the average amount invested in these stocks was $1629 million. That figure was $2870 million in AIG’s case. Baidu, Inc. (NASDAQ:BIDU) is the most popular stock in this table. On the other hand Koninklijke Philips NV (NYSE:PHG) is the least popular one with only 9 bullish hedge fund positions. American International Group Inc (NYSE:AIG) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 1.0% in 2020 through May 1st but beat the market by 12.9 percentage points. Unfortunately AIG wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on AIG were disappointed as the stock returned -52.9% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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