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. Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards American National Insurance Company (NASDAQ:ANAT).
Is American National Insurance Company (NASDAQ:ANAT) going to take off soon? Prominent investors are selling. The number of bullish hedge fund bets shrunk by 1 lately. Our calculations also showed that ANAT 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). ANAT was in 16 hedge funds' portfolios at the end of December. There were 17 hedge funds in our database with ANAT positions at the end of the previous quarter.
Today there are dozens of metrics market participants use to grade publicly traded companies. A couple of the less known metrics are hedge fund and insider trading signals. We have shown that, historically, those who follow the best picks of the top hedge fund managers can outclass the broader indices by a healthy amount (see the details here).
[caption id="attachment_26340" align="aligncenter" width="400"] Ken Griffin of Citadel Investment Group[/caption]
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. 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. Now we're going to take a look at the new hedge fund action surrounding American National Insurance Company (NASDAQ:ANAT).
What does smart money think about American National Insurance Company (NASDAQ:ANAT)?
At the end of the fourth quarter, a total of 16 of the hedge funds tracked by Insider Monkey were long this stock, a change of -6% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in ANAT over the last 18 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in American National Insurance Company (NASDAQ:ANAT) was held by Renaissance Technologies, which reported holding $21.5 million worth of stock at the end of September. It was followed by Lomas Capital Management with a $11.7 million position. Other investors bullish on the company included Arrowstreet Capital, AQR Capital Management, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Lomas Capital Management allocated the biggest weight to American National Insurance Company (NASDAQ:ANAT), around 1.15% of its 13F portfolio. CSat Investment Advisory is also relatively very bullish on the stock, earmarking 0.15 percent of its 13F equity portfolio to ANAT.
Seeing as American National Insurance Company (NASDAQ:ANAT) has experienced falling interest from the entirety of the hedge funds we track, we can see that there were a few fund managers who were dropping their full holdings last quarter. Intriguingly, Matthew Hulsizer's PEAK6 Capital Management sold off the biggest stake of all the hedgies watched by Insider Monkey, comprising about $1.1 million in stock. Israel Englander's fund, Millennium Management, also sold off its stock, about $0.3 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest dropped by 1 funds last quarter.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as American National Insurance Company (NASDAQ:ANAT) but similarly valued. These stocks are QTS Realty Trust Inc (NYSE:QTS), Kodiak Sciences Inc (NASDAQ:KOD), Farfetch Limited (NYSE:FTCH), and Stantec Inc. (NYSE:STN). This group of stocks' market caps match ANAT's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position QTS,23,326983,-4 KOD,11,1147037,4 FTCH,27,492622,5 STN,9,91998,2 Average,17.5,514660,1.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.5 hedge funds with bullish positions and the average amount invested in these stocks was $515 million. That figure was $62 million in ANAT's case. Farfetch Limited (NYSE:FTCH) is the most popular stock in this table. On the other hand Stantec Inc. (NYSE:STN) is the least popular one with only 9 bullish hedge fund positions. American National Insurance Company (NASDAQ:ANAT) 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but beat the market by 5.5 percentage points. Unfortunately ANAT wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); ANAT investors were disappointed as the stock returned -37.4% 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 most of these stocks already outperformed the market in Q1. 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.