We are still in an overall bull market and many stocks that smart money investors were piling into surged in 2019. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 57% each. Hedge funds’ top 3 stock picks returned 44.6% this year and beat the S&P 500 ETFs by nearly 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Hartford Financial Services Group Inc (NYSE:HIG).
Hartford Financial Services Group Inc (NYSE:HIG) was in 32 hedge funds’ portfolios at the end of September. HIG has experienced an increase in hedge fund sentiment of late. There were 30 hedge funds in our database with HIG holdings at the end of the previous quarter. Our calculations also showed that HIG isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Ric Dillon of Diamond Hill Capital
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. Keeping this in mind we’re going to go over the latest hedge fund action encompassing Hartford Financial Services Group Inc (NYSE:HIG).
How have hedgies been trading Hartford Financial Services Group Inc (NYSE:HIG)?
At Q3’s end, a total of 32 of the hedge funds tracked by Insider Monkey were long this stock, a change of 7% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in HIG over the last 17 quarters. With hedgies’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Ric Dillon’s Diamond Hill Capital has the number one position in Hartford Financial Services Group Inc (NYSE:HIG), worth close to $262.7 million, accounting for 1.4% of its total 13F portfolio. The second most bullish fund manager is Citadel Investment Group, managed by Ken Griffin, which holds a $119.8 million position; 0.1% of its 13F portfolio is allocated to the stock. Some other members of the smart money that hold long positions include David E. Shaw’s D E Shaw, Clint Carlson’s Carlson Capital and Robert Pohly’s Samlyn Capital. In terms of the portfolio weights assigned to each position Prana Capital Management allocated the biggest weight to Hartford Financial Services Group Inc (NYSE:HIG), around 4.4% of its 13F portfolio. Diamond Hill Capital is also relatively very bullish on the stock, dishing out 1.4 percent of its 13F equity portfolio to HIG.
As industrywide interest jumped, key money managers were leading the bulls’ herd. PEAK6 Capital Management, managed by Matthew Hulsizer, initiated the largest call position in Hartford Financial Services Group Inc (NYSE:HIG). PEAK6 Capital Management had $16.3 million invested in the company at the end of the quarter. David Harding’s Winton Capital Management also made a $8.3 million investment in the stock during the quarter. The other funds with new positions in the stock are Gregg Moskowitz’s Interval Partners, Jeffrey Talpins’s Element Capital Management, and Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Hartford Financial Services Group Inc (NYSE:HIG) but similarly valued. These stocks are Stanley Black & Decker, Inc. (NYSE:SWK), Snap Inc. (NYSE:SNAP), Cerner Corporation (NASDAQ:CERN), and CoStar Group Inc (NASDAQ:CSGP). This group of stocks’ market values match HIG’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SWK | 26 | 1040404 | -1 |
| SNAP | 52 | 2118425 | 7 |
| CERN | 33 | 954875 | 4 |
| CSGP | 35 | 1384331 | 3 |
| Average | 36.5 | 1374509 | 3.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 36.5 hedge funds with bullish positions and the average amount invested in these stocks was $1375 million. That figure was $849 million in HIG’s case. Snap Inc. (NYSE:SNAP) is the most popular stock in this table. On the other hand Stanley Black & Decker, Inc. (NYSE:SWK) is the least popular one with only 26 bullish hedge fund positions. Hartford Financial Services Group Inc (NYSE:HIG) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. A small number of hedge funds were also right about betting on HIG, though not to the same extent, as the stock returned 38.2% in 2019 (as of 12/23) and outperformed the market.
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.
