Amid an overall bull market, many stocks that smart money investors were collectively bullish on surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. That’s why we weren’t surprised when hedge funds’ top 20 large-cap stock picks generated a return of 37.6% in 2019 (through the end of November) and outperformed the broader market benchmark by 9.9 percentage points.This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.
Is Metlife Inc (NYSE:MET) undervalued? The best stock pickers are turning bullish. The number of long hedge fund positions moved up by 9 in recent months. Our calculations also showed that MET isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
If you’d ask most investors, hedge funds are perceived as worthless, outdated investment vehicles of the past. While there are greater than 8000 funds with their doors open today, We hone in on the moguls of this club, about 750 funds. These investment experts watch over the majority of all hedge funds’ total capital, and by monitoring their top equity investments, Insider Monkey has discovered numerous investment strategies that have historically outperformed the broader indices. Insider Monkey’s flagship short hedge fund strategy outrun the S&P 500 short ETFs by around 20 percentage points annually since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
Ric Dillon of Diamond Hill Capital
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. We’re going to take a look at the recent hedge fund action regarding Metlife Inc (NYSE:MET).
How have hedgies been trading Metlife Inc (NYSE:MET)?
At Q3’s end, a total of 35 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 35% from one quarter earlier. On the other hand, there were a total of 24 hedge funds with a bullish position in MET a year ago. With the smart money’s capital changing hands, there exists a select group of notable hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
Among these funds, Diamond Hill Capital held the most valuable stake in Metlife Inc (NYSE:MET), which was worth $471.2 million at the end of the third quarter. On the second spot was AQR Capital Management which amassed $323.7 million worth of shares. Pzena Investment Management, Arrowstreet Capital, and Millennium Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Diamond Hill Capital allocated the biggest weight to Metlife Inc (NYSE:MET), around 2.51% of its portfolio. Pzena Investment Management is also relatively very bullish on the stock, setting aside 1.59 percent of its 13F equity portfolio to MET.
Now, some big names have jumped into Metlife Inc (NYSE:MET) headfirst. Paloma Partners, managed by Donald Sussman, established the largest position in Metlife Inc (NYSE:MET). Paloma Partners had $50.1 million invested in the company at the end of the quarter. Steve Cohen’s Point72 Asset Management also initiated a $49.7 million position during the quarter. The following funds were also among the new MET investors: Michael Gelband’s ExodusPoint Capital, Renaissance Technologies, and Paul Tudor Jones’s Tudor Investment Corp.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Metlife Inc (NYSE:MET) but similarly valued. These stocks are BCE Inc. (NYSE:BCE), Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX), Tesla Inc. (NASDAQ:TSLA), and EOG Resources Inc (NYSE:EOG). This group of stocks’ market caps resemble MET’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BCE | 13 | 415810 | -1 |
| VRTX | 46 | 2296101 | 6 |
| TSLA | 28 | 570594 | -9 |
| EOG | 48 | 1449930 | 12 |
| Average | 33.75 | 1183109 | 2 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 33.75 hedge funds with bullish positions and the average amount invested in these stocks was $1183 million. That figure was $2050 million in MET’s case. EOG Resources Inc (NYSE:EOG) is the most popular stock in this table. On the other hand BCE Inc. (NYSE:BCE) is the least popular one with only 13 bullish hedge fund positions. Metlife Inc (NYSE:MET) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on MET, though not to the same extent, as the stock returned 6.8% during the first two months of the fourth quarter and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
