American International Group Inc. has replaced Apple Inc. as the hedge fund industry’s favourite stock, according to a Goldman Sachs Group analysis of fourth-quarter regulatory filings.
The American insurer, bailed out by the U.S. government during the financial crisis, knocked Apple out of the top spot in a list of stocks deemed most important to hedge funds, according to a Goldman report released late Wednesday.
The fact that Apple has lost favour with many hedge fund managers is not too surprising, given the 20-per-cent slide in the stock in the fourth quarter. Still, Apple’s fall from grace follows a long run as No. 1.
“For the first time in three years Apple was not the top stock in our VIP list, instead ranking as the third most frequent top-10 holding,” the report said, adding that funds reduced their Apple positions “by over 30 per cent.”
AIG was held by a number of well-known hedge fund managers at the end of 2012, including Daniel Loeb’s Third Point, David Tepper’s Appaloosa Management and George Soros’s personal money management firm, according to quarterly 13-F regulatory filings that became public last week.
Bruce Berkowitz’s Fairholme Capital Management also owns a major stake in AIG. Activist hedge fund Jana Partners added to its AIG holdings in the fourth quarter.
Mr. Loeb began scooping up AIG shares in the second and third quarters of 2012, arguing it is a “cheap restructured equity” that has “significant upside,” according to a recent Third Point investor letter reviewed by Reuters.
AIG was one of the hedge fund’s biggest winners in the fourth quarter, the letter said. Shares of AIG rose 7.65 per cent in the quarter.
Mr. Loeb and several other notable hedge fund managers, including Omega Advisors’ Leon Cooperman and Eton Park’s Eric Mindich, dumped their Apple stakes in the fourth quarter, according to regulatory disclosures filed in February.
Apple shares have tumbled in price since hitting an all-time high of $705.07 (U.S.) on Sept. 21. They had fallen 24 per cent by the end of 2012.
The stock has continued to languish this year and was one of the worst performers in the S&P 500 stock index in January, dropping 17 per cent as investors continued to worry about increasing competition and declining profit margins.
The company is also now embroiled in a legal battle with hedge fund veteran David Einhorn, who has been a proponent of the technology giant for many years at his hedge fund Greenlight Capital, even dispensing iPod Nanos to investors as a gift in 2011.
Mr. Einhorn, who added to his hedge fund’s Apple holdings in the fourth quarter, has filed a lawsuit to block changes in Apple’s policy for issuing preferred stock. He is advocating that the company issue a new class of preferred stock to share more of its $137-billion cash pile with shareholders.