Hedge Funds Are Buying The Hanover Insurance Group, Inc. (THG)

Hedge funds are not perfect. They have their bad picks just like everyone else. Micron, a stock hedge funds have loved, lost 50% during the last 12 months ending in October 30. Although hedge funds are not perfect, their consensus picks do deliver solid returns, however. Our data show the top 30 S&P 500 stocks among hedge funds at the end of September 2014 yielded an average return of 9.5% in the same time period, vs. a gain of 5.2% for the S&P 500 Index. Because hedge funds have a lot of resources and their consensus picks do well, we pay attention to what they think. In this article, we analyze what the elite funds think of Hanover Insurance Group, Inc. (NYSE:THG).

Hanover Insurance Group, Inc. (NYSE:THG) has seen an increase in enthusiasm from smart money lately. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity, but it may still be less popular than similarly priced stocks. That’s why at the end of this article, we will examine companies such as Extended Stay America Inc (NYSE:STAY), J2 Global Inc (NASDAQ:JCOM), and PAREXEL International Corporation (NASDAQ:PRXL) to gather more data points.

In the 21st century investor’s toolkit, there are plenty of gauges stock market investors can use to appraise publicly traded companies. A pair of the most innovative gauges are hedge fund and insider trading sentiment. Our researchers have shown that, historically, those who follow the top picks of the elite fund managers can outpace their index-focused peers by a healthy amount (see the details here).

With all of this in mind, let’s view the key action encompassing Hanover Insurance Group, Inc. (NYSE:THG).

How have hedgies been trading Hanover Insurance Group, Inc. (NYSE:THG)?

At the end of Q3, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on this stock, an increase of 25% from the second quarter. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Lee Munder’s Lee Munder Capital Group has the most valuable position in Hanover Insurance Group, Inc. (NYSE:THG), worth close to $39.2 million, comprising 0.8% of its total 13F portfolio. Sitting at the No. 2 spot is Cliff Asness of AQR Capital Management, with a $29.7 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors with similar optimism comprise Ken Griffin’s Citadel Investment Group, Israel Englander’s Millennium Management, and Renaissance Technologies.

Consequently, specific money managers have been driving this bullishness. Visium Asset Management, managed by Jacob Gottlieb, initiated the largest position in Hanover Insurance Group, Inc. (NYSE:THG). Visium Asset Management had $9.4 million invested in the company at the end of the quarter. Steve Cohen’s Point72 Asset Management also initiated an $8.8 million position during the quarter. The other funds with new positions in the stock are Lawrence Sapanski’s Scoria Capital, George Hall’s Clinton Group, and Peter Muller’s PDT Partners.

Let’s now take a look at hedge fund activity in other stocks similar to Hanover Insurance Group, Inc. (NYSE:THG). We will take a look at Extended Stay America Inc (NYSE:STAY), J2 Global Inc (NASDAQ:JCOM), PAREXEL International Corporation (NASDAQ:PRXL), and Neurocrine Biosciences, Inc. (NASDAQ:NBIX). This group of stocks’ market valuations is closest to Hanover Insurance Group, Inc. (NYSE:THG)’s market valuation.

As you can see, these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $702 million. That figure was $164 million in Hanover Insurance Group, Inc. (NYSE:THG)’s case. Neurocrine Biosciences, Inc. (NASDAQ:NBIX) is the most popular stock in this table. On the other hand, PAREXEL International Corporation (NASDAQ:PRXL) is the least popular one with only 13 bullish hedge fund positions. Hanover Insurance Group, Inc. (NYSE:THG) is not the most popular stock in this group, but hedge fund interest is still above average. This is a slightly positive signal, but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard, Neurocrine Biosciences, Inc. (NASDAQ:NBIX) might be a better candidate to consider a long position.