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New data in from artificial intelligence specialist Irithmics shows that institutional allocators are looking less than enthusiastic about both Aviva (LSE:AV) and NatWest Group (LSE:NWG) shares. This is based on analysis by a sophisticated machine learning program which monitors fund manager activity and allocations in the market.

In both cases long term investors remain positive on the prospects for both stocks. Irithmics can distinguish between those professional investors who are in the shares for the long term and those who are trying to exploit short term share price action. Long term investors have slightly more appetite for NatWest at the moment, but in both cases appetite is still low compared to other FTSE 100 stocks.

Tactical investors have almost zero appetite for Aviva

Short term investors are negative on both shares, and there is strong negative bias in the market right now. Appetite is higher for NatWest shares. Aviva is looking shocking when it comes to the posture of shorter term institutional shareholders. There is strong expectation of negative news coming out of the asset management and insurance group.

This data shows that over the short term we can expect fund managers to reduce allocations to these shares or indeed seize opportunities to sell the stock. Given the size of the firms that Irithmics tracks, this could have a significant impact on the share price.

Looking at the 90 day picture, NatWest shares have proved surprisingly volatile. The stock is having trouble breaking above the 200 level and is not far off its 52 week trading range. The share price has done well since early February. This month the company reported an 82% increase in its first quarter profits. It also said that it was putting aside £102m in cash for loans that may not be repaid as a result of the coronavirus crisis. Investors have been paying attention to the fact that NatWest took a hit for loan provisions in 2020.

Are fund managers worried about NatWest Group’s exposure to the real UK economy

Herein lies the crux of the issue, and which may explain why short term investors are lining up onto the sell side with NatWest right now. There is uncertainty about the health of the UK economy and the health of many businesses that NatWest lends to. Defaults remain low because of the UK government support scheme but ask economists what the UK economy looks like without that and their language gets a lot vaguer. If you are an investor with NatWest Group shares that should make you a little bit concerned.

Aviva shares had been doing well since the start of the year, but like with NatWest, they are now looking more rangebound. Aviva is not a bank, so exposure to the UK business sector is going to be less of an issue here. We have an Aviva trading statement due out tomorrow (Tuesday) which will make interesting reading. The insurer has sold off a number of its designated non-core assets and is estimated to have over £3bn in cash in its war chest. Barclays has said it is expecting to see some form of share buy back scheme announced this week, possibly as much as £3bn, which would certainly be good for the share price.

Which begs the question: why all the doom and gloom from the tactical traders around Aviva right now?


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Please note this article does not constitute investment advice. Investors are encouraged to do their own research beforehand or consult a professional advisor.

Stuart Fieldhouse

Stuart Fieldhouse

Stuart Fieldhouse has spent 25 years in journalism and marketing, including as a wealth management editor for the Financial Times group, covering capital markets and international private banking, and as an investment banking correspondent for Euromoney in Hong Kong. He was the founder editor of The Hedge Fund Journal.

Stuart has worked at CMC Markets, supporting the re-launch of its global financial spread betting and CFD trading platforms. He is also the author of two books on trading, published by Financial Times Pearson. Based in The Armchair Trader’s London office, Stuart continues to advise fund managers, private banks, family offices and other financial institutions.

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