We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of June. At Insider Monkey, we follow nearly 835 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Selective Insurance Group, Inc. (NASDAQ:SIGI), so let’s take a closer look at the sentiment that surrounds it in the current quarter.
Is Selective Insurance Group, Inc. (NASDAQ:SIGI) a buy here? Prominent investors are turning less bullish. The number of long hedge fund bets fell by 1 recently. Our calculations also showed that SIGI isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings). SIGI was in 25 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 26 hedge funds in our database with SIGI holdings at the end of the previous quarter.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 41 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Michael Platt of BlueCrest Capital Mgmt.
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s take a peek at the recent hedge fund action encompassing Selective Insurance Group, Inc. (NASDAQ:SIGI).
What have hedge funds been doing with Selective Insurance Group, Inc. (NASDAQ:SIGI)?
Heading into the first quarter of 2020, a total of 25 of the hedge funds tracked by Insider Monkey were long this stock, a change of -4% from one quarter earlier. By comparison, 14 hedge funds held shares or bullish call options in SIGI a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Renaissance Technologies, holds the biggest position in Selective Insurance Group, Inc. (NASDAQ:SIGI). Renaissance Technologies has a $19.1 million position in the stock, comprising less than 0.1%% of its 13F portfolio. The second most bullish fund manager is Balyasny Asset Management, managed by Dmitry Balyasny, which holds a $17.1 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Some other professional money managers that hold long positions consist of Israel Englander’s Millennium Management, Ken Griffin’s Citadel Investment Group and D. E. Shaw’s D E Shaw. In terms of the portfolio weights assigned to each position Prospector Partners allocated the biggest weight to Selective Insurance Group, Inc. (NASDAQ:SIGI), around 1.29% of its 13F portfolio. Quantinno Capital is also relatively very bullish on the stock, designating 0.35 percent of its 13F equity portfolio to SIGI.
Seeing as Selective Insurance Group, Inc. (NASDAQ:SIGI) has faced bearish sentiment from the aggregate hedge fund industry, we can see that there were a few hedgies that elected to cut their entire stakes last quarter. Interestingly, Benjamin A. Smith’s Laurion Capital Management dropped the largest position of the “upper crust” of funds followed by Insider Monkey, worth close to $0.8 million in stock, and Ronald Hua’s Qtron Investments was right behind this move, as the fund sold off about $0.3 million worth. These bearish behaviors are important to note, as total hedge fund interest fell by 1 funds last quarter.
Let’s check out hedge fund activity in other stocks similar to Selective Insurance Group, Inc. (NASDAQ:SIGI). We will take a look at United Therapeutics Corporation (NASDAQ:UTHR), ICU Medical, Inc. (NASDAQ:ICUI), Wright Medical Group N.V. (NASDAQ:WMGI), and Schneider National, Inc. (NYSE:SNDR). This group of stocks’ market values are closest to SIGI’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| UTHR | 36 | 1137929 | 3 |
| ICUI | 17 | 402123 | 1 |
| WMGI | 46 | 1070415 | 7 |
| SNDR | 22 | 115086 | 4 |
| Average | 30.25 | 681388 | 3.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 30.25 hedge funds with bullish positions and the average amount invested in these stocks was $681 million. That figure was $111 million in SIGI’s case. Wright Medical Group N.V. (NASDAQ:WMGI) is the most popular stock in this table. On the other hand ICU Medical, Inc. (NASDAQ:ICUI) is the least popular one with only 17 bullish hedge fund positions. Selective Insurance Group, Inc. (NASDAQ:SIGI) 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but beat the market by 5.5 percentage points. Unfortunately SIGI wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); SIGI investors were disappointed as the stock returned -27.2% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in Q1.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
