Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 900 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Marsh & McLennan Companies, Inc. (NYSE:MMC).
Is Marsh & McLennan Companies, Inc. (NYSE:MMC) a good investment right now? Money managers were getting less bullish. The number of bullish hedge fund bets were cut by 6 in recent months. Marsh & McLennan Companies, Inc. (NYSE:MMC) was in 37 hedge funds’ portfolios at the end of March. The all time high for this statistic is 43. Our calculations also showed that MMC isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 43 hedge funds in our database with MMC positions at the end of the fourth quarter.
Today there are dozens of indicators stock market investors can use to assess stocks. Two of the most under-the-radar indicators are hedge fund and insider trading activity. Our researchers have shown that, historically, those who follow the top picks of the elite investment managers can outclass their index-focused peers by a superb amount (see the details here). Also, our monthly newsletter’s portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .
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Do Hedge Funds Think MMC Is A Good Stock To Buy Now?
At first quarter’s end, a total of 37 of the hedge funds tracked by Insider Monkey were long this stock, a change of -14% from one quarter earlier. On the other hand, there were a total of 37 hedge funds with a bullish position in MMC a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Berkshire Hathaway held the most valuable stake in Marsh & McLennan Companies, Inc. (NYSE:MMC), which was worth $644 million at the end of the fourth quarter. On the second spot was Diamond Hill Capital which amassed $266.4 million worth of shares. Viking Global, Arrowstreet Capital, and Polar Capital 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 3G Sahana Capital Management allocated the biggest weight to Marsh & McLennan Companies, Inc. (NYSE:MMC), around 10.78% of its 13F portfolio. Bishop Rock Capital is also relatively very bullish on the stock, dishing out 5.29 percent of its 13F equity portfolio to MMC.
Judging by the fact that Marsh & McLennan Companies, Inc. (NYSE:MMC) has experienced declining sentiment from the aggregate hedge fund industry, we can see that there were a few money managers that decided to sell off their entire stakes heading into Q2. It’s worth mentioning that Dmitry Balyasny’s Balyasny Asset Management dumped the biggest investment of the 750 funds watched by Insider Monkey, comprising an estimated $33.6 million in stock, and Paul Marshall and Ian Wace’s Marshall Wace LLP was right behind this move, as the fund said goodbye to about $20.9 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest was cut by 6 funds heading into Q2.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Marsh & McLennan Companies, Inc. (NYSE:MMC) but similarly valued. These stocks are ABB Ltd (NYSE:ABB), Ecolab Inc. (NYSE:ECL), Dominion Energy Inc. (NYSE:D), Autodesk, Inc. (NASDAQ:ADSK), NIO Inc. (NYSE:NIO), Equinix, Inc. (REIT) (NASDAQ:EQIX), and Workday Inc (NASDAQ:WDAY). All of these stocks’ market caps are closest to MMC’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ABB | 11 | 563747 | 3 |
| ECL | 42 | 2403354 | -3 |
| D | 39 | 1295937 | -8 |
| ADSK | 66 | 3056525 | 0 |
| NIO | 28 | 1321170 | -6 |
| EQIX | 41 | 1546339 | -1 |
| WDAY | 69 | 5179677 | -11 |
| Average | 42.3 | 2195250 | -3.7 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 42.3 hedge funds with bullish positions and the average amount invested in these stocks was $2195 million. That figure was $2144 million in MMC’s case. Workday Inc (NASDAQ:WDAY) is the most popular stock in this table. On the other hand ABB Ltd (NYSE:ABB) is the least popular one with only 11 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. Our overall hedge fund sentiment score for MMC is 47.2. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 19.3% in 2021 through June 25th and still beat the market by 4.8 percentage points. A small number of hedge funds were also right about betting on MMC as the stock returned 15.1% since the end of the first quarter (through 6/25) and outperformed the market by an even larger margin.
Follow Marsh & Mclennan Companies Inc. (NYSE:MMC)
Follow Marsh & Mclennan Companies Inc. (NYSE:MMC)
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Disclosure: None. This article was originally published at Insider Monkey.
