Amid an overall market correction, many stocks that smart money investors were collectively bullish on tanked during the third quarter. Among them, Valeant and Micron ranked among the top 30 picks and both lost around 20%. Citigroup, which was the third most popular stock, lost 10% amid uncertainty regarding the interest rates. Nevertheless, our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.
Partnerre Ltd (NYSE:PRE) was in 24 hedge funds’ portfolios at the end of the third quarter of 2015. PRE investors should pay attention to a decrease in hedge fund interest lately. There were 35 hedge funds in our database with PRE holdings at the end of the previous quarter. 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 NetSuite Inc (NYSE:N), Lululemon Athletica inc. (NASDAQ:LULU), and FactSet Research Systems Inc. (NYSE:FDS) to gather more data points.
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At the moment there are a multitude of metrics stock traders put to use to size up stocks. Some of the most under-the-radar metrics are hedge fund and insider trading indicators. Our experts have shown that, historically, those who follow the best picks of the top investment managers can trounce their index-focused peers by a significant amount (see the details here).
Now, we’re going to review the fresh action surrounding Partnerre Ltd (NYSE:PRE).
What does the smart money think about Partnerre Ltd (NYSE:PRE)?
Heading into Q4, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -31% from the previous quarter. With the smart money’s capital changing hands, there exists a select group of notable hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, John Orrico’s Water Island Capital has the most valuable position in Partnerre Ltd (NYSE:PRE), worth close to $171.6 million, comprising 8.8% of its total 13F portfolio. The second largest stake is held by Jim Simons’ Renaissance Technologies, with an $99.1 million position; 0.2% of its 13F portfolio is allocated to the stock. Remaining peers with similar optimism include Thomas Steyer’s Farallon Capital, Tony Chedraoui’s Tyrus Capital and Clint Carlson’s Carlson Capital.
Due to the fact that Partnerre Ltd (NYSE:PRE) has faced declining sentiment from hedge fund managers, we can see that there was a specific group of hedge funds that decided to sell off their positions entirely heading into Q4. Intriguingly, Carl Tiedemann and Michael Tiedemann’s TIG Advisors sold off the biggest investment of the “upper crust” of funds watched by Insider Monkey, valued at close to $43.5 million in stock. Douglas Hirsch’s fund, Seneca Capital, also sold off its stock, about $25.9 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest dropped by 11 funds heading into Q4.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Partnerre Ltd (NYSE:PRE) but similarly valued. We will take a look at NetSuite Inc (NYSE:N), Lululemon Athletica inc. (NASDAQ:LULU), FactSet Research Systems Inc. (NYSE:FDS), and Alliant Energy Corporation (NYSE:LNT). This group of stocks’ market values match PRE’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| N | 14 | 239478 | 1 |
| LULU | 32 | 837350 | -3 |
| FDS | 24 | 169594 | 1 |
| LNT | 17 | 83714 | 3 |
As you can see these stocks had an average of 22 hedge funds with bullish positions and the average amount invested in these stocks was $333 million, below the $817 million figure in PRE’s case. Lululemon Athletica inc. (NASDAQ:LULU) is the most popular stock in this table, while NetSuite Inc (NYSE:N) is the least popular one with only 14 bullish hedge fund positions. Partnerre Ltd (NYSE:PRE) 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 LULU might be a better candidate to consider a long position.
