Before putting in our own effort and resources into finding a good investment, we can quickly utilize hedge fund expertise to give us a quick glimpse of whether that stock could make for a good addition to our portfolios. The odds are not exactly stacked in investors’ favor when it comes to beating the market, as evidenced by the fact that less than 49% of the stocks in the S&P 500 did so during the second quarter. The stats were even worse in recent years when most of the advances in the market were due to large gains by FAANG stocks. However, one bright side for individual investors was the strong performance of hedge funds’ top consensus picks. This year hedge funds’ top 20 stock picks outperformed the S&P 500 Index by 6.6 percentage points through May 30th. Thus, we can see that the tireless research and efforts of hedge funds to identify winning stocks can work to our advantage when we know how to use the data. While not all of their picks will be winners, our odds are much better following their best stock picks than trying to go it alone.
Voya Financial Inc (NYSE:VOYA) investors should pay attention to an increase in enthusiasm from smart money in recent months. VOYA was in 45 hedge funds’ portfolios at the end of the first quarter of 2019. There were 38 hedge funds in our database with VOYA holdings at the end of the previous quarter. Our calculations also showed that voya isn’t among the 30 most popular stocks among hedge funds.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
We’re going to analyze the fresh hedge fund action regarding Voya Financial Inc (NYSE:VOYA).
How have hedgies been trading Voya Financial Inc (NYSE:VOYA)?
Heading into the second quarter of 2019, a total of 45 of the hedge funds tracked by Insider Monkey were long this stock, a change of 18% from the fourth quarter of 2018. On the other hand, there were a total of 41 hedge funds with a bullish position in VOYA a year ago. With hedgies’ capital changing hands, there exists a select group of notable hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Pzena Investment Management, managed by Richard S. Pzena, holds the number one position in Voya Financial Inc (NYSE:VOYA). Pzena Investment Management has a $405.7 million position in the stock, comprising 2.2% of its 13F portfolio. The second most bullish fund manager is Samlyn Capital, led by Robert Pohly, holding a $165.6 million position; the fund has 3.9% of its 13F portfolio invested in the stock. Remaining professional money managers with similar optimism encompass Israel Englander’s Millennium Management, Dmitry Balyasny’s Balyasny Asset Management and Ken Griffin’s Citadel Investment Group.
With a general bullishness amongst the heavyweights, specific money managers have jumped into Voya Financial Inc (NYSE:VOYA) headfirst. Adage Capital Management, managed by Phill Gross and Robert Atchinson, created the most outsized position in Voya Financial Inc (NYSE:VOYA). Adage Capital Management had $41.4 million invested in the company at the end of the quarter. James Parsons’s Junto Capital Management also made a $17.5 million investment in the stock during the quarter. The following funds were also among the new VOYA investors: Clint Carlson’s Carlson Capital, Bruce Kovner’s Caxton Associates LP, and Jim Simons’s Renaissance Technologies.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Voya Financial Inc (NYSE:VOYA) but similarly valued. We will take a look at AMERCO (NASDAQ:UHAL), Aramark (NYSE:ARMK), News Corp (NASDAQ:NWSA), and Enel Chile S.A. (NYSE:ENIC). This group of stocks’ market caps match VOYA’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| UHAL | 12 | 390787 | 5 |
| ARMK | 38 | 853818 | -1 |
| NWSA | 21 | 517519 | -2 |
| ENIC | 5 | 31551 | -2 |
| Average | 19 | 448419 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $448 million. That figure was $1332 million in VOYA’s case. Aramark (NYSE:ARMK) is the most popular stock in this table. On the other hand Enel Chile S.A. (NYSE:ENIC) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Voya Financial Inc (NYSE:VOYA) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Hedge funds were also right about betting on VOYA as the stock returned 4.8% during the same period and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.
