Were Hedge Funds Right About Dumping Athene Holding Ltd. (ATH) Before The Coronavirus?

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 (10 coronavirus predictions).

In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on December 31st. We at Insider Monkey have made an extensive database of more than 835 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded Athene Holding Ltd. (NYSE:ATH) based on those filings.

Is Athene Holding Ltd. (NYSE:ATH) a bargain? Prominent investors are selling. The number of bullish hedge fund bets fell by 8 lately. Our calculations also showed that ATH 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).

In the financial world there are several formulas market participants put to use to appraise publicly traded companies. A couple of the less known formulas are hedge fund and insider trading moves. Our researchers have shown that, historically, those who follow the best picks of the best money managers can outclass their index-focused peers by a significant amount (see the details here).

Christian Leone of Luxor Capital Group

We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s review the latest hedge fund action encompassing Athene Holding Ltd. (NYSE:ATH).

How are hedge funds trading Athene Holding Ltd. (NYSE:ATH)?

Heading into the first quarter of 2020, a total of 35 of the hedge funds tracked by Insider Monkey were long this stock, a change of -19% from the previous quarter. By comparison, 43 hedge funds held shares or bullish call options in ATH a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).

More specifically, AQR Capital Management was the largest shareholder of Athene Holding Ltd. (NYSE:ATH), with a stake worth $313.6 million reported as of the end of September. Trailing AQR Capital Management was Samlyn Capital, which amassed a stake valued at $170.5 million. Lakewood Capital Management, GLG Partners, and King Street Capital 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 25.12% of its 13F portfolio. KG Funds Management is also relatively very bullish on the stock, setting aside 11.4 percent of its 13F equity portfolio to ATH.

Because Athene Holding Ltd. (NYSE:ATH) has witnessed a decline in interest from the smart money, it’s safe to say that there exists a select few money managers that slashed their entire stakes by the end of the third quarter. Interestingly, Andreas Halvorsen’s Viking Global cut the largest stake of the “upper crust” of funds monitored by Insider Monkey, comprising about $108.9 million in stock. Mitch Kuflik and Rob Sobel’s fund, Brahman Capital, also cut its stock, about $88.7 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest was cut by 8 funds by the end of the third quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Athene Holding Ltd. (NYSE:ATH) but similarly valued. We will take a look at Graco Inc. (NYSE:GGG), Under Armour Inc (NYSE:UA), RenaissanceRe Holdings Ltd. (NYSE:RNR), and Cypress Semiconductor Corporation (NASDAQ:CY). All of these stocks’ market caps match ATH’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
GGG 21 234617 -1
UA 32 1014322 -2
RNR 23 765361 5
CY 36 1441339 1
Average 28 863910 0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 28 hedge funds with bullish positions and the average amount invested in these stocks was $864 million. That figure was $1369 million in ATH’s case. Cypress Semiconductor Corporation (NASDAQ:CY) is the most popular stock in this table. On the other hand Graco Inc. (NYSE:GGG) is the least popular one with only 21 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. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 22.3% in 2020 through March 16th but beat the market by 3.2 percentage points. Unfortunately ATH wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on ATH were disappointed as the stock returned -53.6% 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 20 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.