Hedge Funds Are Buying The Chubb Corporation (CB)

The market has been volatile as the Federal Reserve winds down its easy money policies. Small cap stocks have been hit hard as a result, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by more than 14 percentage points between June 25th and the end of October. SEC filings and hedge fund investor letters indicate that the smart money seems to be paring back their overall long exposure, and the funds’ movements is one of the reasons why the major indexes have retraced. In this article, we analyze what the smart money thinks of The Chubb Corporation (NYSE:CB) and find out how it is affected by hedge funds’ moves.

Is The Chubb Corporation (NYSE:CB) the right pick for your portfolio? The best stock pickers are betting on the stock. The number of long hedge fund positions moved up by 23 in recent months. CB was in 48 hedge funds’ portfolios at the end of the third quarter of 2015. There were 25 hedge funds in our database with CB holdings at the end of the previous quarter. At the end of this article we will also compare CB to other stocks including Monster Beverage Corp (NASDAQ:MNST), Marsh & McLennan Companies, Inc. (NYSE:MMC), and Williams Companies, Inc. (NYSE:WMB) to get a better sense of its popularity.

To most shareholders, hedge funds are viewed as unimportant, old investment tools of the past. While there are more than 8000 funds trading today, Our researchers choose to focus on the crème de la crème of this club, around 700 funds. It is estimated that this group of investors command the lion’s share of the hedge fund industry’s total capital, and by tailing their finest picks, Insider Monkey has identified a number of investment strategies that have historically outrun the S&P 500 index. Insider Monkey’s small-cap hedge fund strategy outpaced the S&P 500 index by 12 percentage points per annum for a decade in their back tests.

Keeping this in mind, we’re going to analyze the new action encompassing The Chubb Corporation (NYSE:CB).

What have hedge funds been doing with The Chubb Corporation (NYSE:CB)?

At the end of the third quarter, a total of 48 of the hedge funds tracked by Insider Monkey were long this stock, a change of 92% from one quarter earlier. With hedge funds’ sentiment swirling, there exists a select group of key hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Carlson Capital, managed by Clint Carlson, holds the largest position in The Chubb Corporation (NYSE:CB). Carlson Capital has a $207.7 million position in the stock, comprising 2.4% of its 13F portfolio. The second largest stake is held by Adage Capital Management, managed by Phill Gross and Robert Atchinson, which holds a $160.5 million position; the fund has 0.4% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors that hold long positions contain Robert Emil Zoellner’s Alpine Associates, John Orrico’s Water Island Capital and Shane Finemore’s Manikay Partners.

Consequently, key hedge funds were leading the bulls’ herd. Carlson Capital, managed by Clint Carlson, assembled a position in The Chubb Corporation (NYSE:CB). Carlson Capital had $207.7 million invested in the company at the end of the quarter. Robert Emil Zoellner’s Alpine Associates also initiated a $152.3 million position during the quarter. The other funds with brand new CB positions are John Orrico’s Water Island Capital, Shane Finemore’s Manikay Partners, and Matthew Mark’s Jet Capital Investors.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as The Chubb Corporation (NYSE:CB) but similarly valued. These stocks are Monster Beverage Corp (NASDAQ:MNST), Marsh & McLennan Companies, Inc. (NYSE:MMC), Williams Companies, Inc. (NYSE:WMB), and WPP PLC (ADR) (NASDAQ:WPPGY). This group of stocks’ market valuations are similar to CB’s market valuation.

As you can see these stocks had an average of 34 hedge funds with bullish positions and the average amount invested in these stocks was $1845 million. That figure was $1432 million in CB’s case. Williams Companies, Inc. (NYSE:WMB) is the most popular stock in this table. On the other hand WPP PLC (ADR) (NASDAQ:WPPGY) is the least popular one. Although, the Chubb Corporation (NYSE:CB) is not the most popular stock in this group, it has attracted attention from investors. Even though, this may imply it is a stock worth considering, his is a slightly positive signal, we’d rather spend our time researching stocks that hedge funds are piling on. In this regard, WMB might be a better candidate to consider a long position.