Hedge Funds Are Dumping Marsh & McLennan Companies, Inc. (MMC)

We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Ackman’s recent Valeant losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Marsh & McLennan Companies, Inc. (NYSE:MMC).

Is Marsh & McLennan Companies, Inc. (NYSE:MMC) a healthy stock for your portfolio? The best stock pickers are taking a pessimistic view. The number of bullish hedge fund positions went down by 6 recently. MMC was in 26 hedge funds’ portfolios at the end of the third quarter of 2015. There were 32 hedge funds in our database with MMC positions at the end of the previous quarter. At the end of this article we will also compare MMC to other stocks, including Williams Companies, Inc. (NYSE:WMB), WPP PLC (ADR) (NASDAQ:WPPGY), and Air Products & Chemicals, Inc. (NYSE:APD) to get a better sense of its popularity.

At the moment there are a multitude of indicators stock traders can use to evaluate their holdings. Two of the most underrated indicators are hedge fund and insider trading sentiment. Our experts have shown that, historically, those who follow the top picks of the elite hedge fund managers can outpace their index-focused peers by a significant margin (see the details here).

With all of this in mind, we’re going to analyze the new action encompassing Marsh & McLennan Companies, Inc. (NYSE:MMC).

How have hedgies been trading Marsh & McLennan Companies, Inc. (NYSE:MMC)?

At Q3’s end, a total of 26 of the hedge funds tracked by Insider Monkey held long positions in this stock, a drop of 19% from one quarter earlier. With hedge funds’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, International Value Advisers, managed by Charles de Vaulx, holds the largest position in Marsh & McLennan Companies, Inc. (NYSE:MMC). The fund has a $57.9 million position in the stock, comprising 1.5% of its 13F portfolio. Coming in second is Phill Gross and Robert Atchinson of Adage Capital Management, with a $41.5 million position; 0.1% of its 13F portfolio is allocated to the stock. Some other members of the smart money that hold long positions comprise Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Brian Ashford-Russell and Tim Woolley’s Polar Capital and David Harding’s Winton Capital Management.

Because Marsh & McLennan Companies, Inc. (NYSE:MMC) has faced falling interest from hedge fund managers, we can see that there lies a certain “tier” of money managers who sold off their entire stakes in the third quarter. Intriguingly, Israel Englander’s Millennium Management dumped the largest position of all the hedgies followed by Insider Monkey, worth close to $28.8 million in stock. Dmitry Balyasny’s fund, Balyasny Asset Management, also dropped its holding, about $9.4 million worth of MMC shares. These moves are important to note, as total hedge fund interest dropped by 6 funds in the third quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Marsh & McLennan Companies, Inc. (NYSE:MMC). We will take a look at Williams Companies, Inc. (NYSE:WMB), WPP PLC (ADR) (NASDAQ:WPPGY), Air Products & Chemicals, Inc. (NYSE:APD), and State Street Corporation (NYSE:STT). This group of stocks’ market valuations match MMC’s market valuation.

As you can see these stocks had an average of 46 hedge funds with bullish positions and the average amount invested in these stocks was $3.67 billion. That figure was a meager $486 million in MMC’s case. Air Products & Chemicals, Inc. (NYSE:APD) is the most popular stock in this table. On the other hand WPP PLC (ADR) (NASDAQ:WPPGY) is the least popular one with only 9 bullish hedge fund positions. Marsh & McLennan Companies, Inc. (NYSE:MMC) 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. In this regard APD might be a better candidate to consider a long position.