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 March 31st, about a week after the S&P 500 Index bottomed. We at Insider Monkey have made an extensive database of more than 821 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded Globe Life Inc. (NYSE:GL) based on those filings.
Is Globe Life Inc. (NYSE:GL) a cheap investment now? Hedge funds are becoming less hopeful. The number of bullish hedge fund bets dropped by 1 in recent months. Our calculations also showed that GL isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). GL was in 22 hedge funds’ portfolios at the end of March. There were 23 hedge funds in our database with GL positions at the end of the previous quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 58 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Warren Buffett of Berkshire Hathaway
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. 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 the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s take a peek at the recent hedge fund action encompassing Globe Life Inc. (NYSE:GL).
How have hedgies been trading Globe Life Inc. (NYSE:GL)?
At the end of the first quarter, a total of 22 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -4% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards GL over the last 18 quarters. With hedgies’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
The largest stake in Globe Life Inc. (NYSE:GL) was held by Berkshire Hathaway, which reported holding $457.3 million worth of stock at the end of September. It was followed by Pzena Investment Management with a $21.9 million position. Other investors bullish on the company included Renaissance Technologies, Prospector Partners, and Millennium Management. In terms of the portfolio weights assigned to each position Prospector Partners allocated the biggest weight to Globe Life Inc. (NYSE:GL), around 2.98% of its 13F portfolio. Hi-Line Capital Management is also relatively very bullish on the stock, earmarking 2.79 percent of its 13F equity portfolio to GL.
Judging by the fact that Globe Life Inc. (NYSE:GL) has experienced falling interest from the entirety of the hedge funds we track, it’s easy to see that there exists a select few hedgies that decided to sell off their full holdings by the end of the first quarter. Interestingly, Donald Sussman’s Paloma Partners said goodbye to the largest investment of all the hedgies monitored by Insider Monkey, valued at close to $3.8 million in stock, and Minhua Zhang’s Weld Capital Management was right behind this move, as the fund sold off about $1.7 million worth. These moves are important to note, as aggregate hedge fund interest was cut by 1 funds by the end of the first quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Globe Life Inc. (NYSE:GL) but similarly valued. We will take a look at RPM International Inc. (NYSE:RPM), Host Hotels and Resorts Inc (NYSE:HST), Mylan N.V. (NASDAQ:MYL), and InterContinental Hotels Group PLC (NYSE:IHG). This group of stocks’ market caps match GL’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| RPM | 22 | 191448 | -9 |
| HST | 24 | 130445 | -3 |
| MYL | 49 | 1469905 | 2 |
| IHG | 4 | 9968 | -2 |
| Average | 24.75 | 450442 | -3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.75 hedge funds with bullish positions and the average amount invested in these stocks was $450 million. That figure was $574 million in GL’s case. Mylan N.V. (NASDAQ:MYL) is the most popular stock in this table. On the other hand InterContinental Hotels Group PLC (NYSE:IHG) is the least popular one with only 4 bullish hedge fund positions. Globe Life Inc. (NYSE:GL) 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 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 13.9% in 2020 through June 10th and surpassed the market by 14.2 percentage points. Unfortunately GL wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); GL investors were disappointed as the stock returned 14.9% during the second quarter 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 most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.
