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 (read our latest 10 coronavirus predictions).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the fourth quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4 years and analyze what the smart money thinks of Globe Life Inc. (NYSE:GL) based on that data.
Globe Life Inc. (NYSE:GL) shareholders have witnessed an increase in support from the world’s most elite money managers lately. Our calculations also showed that GL isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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.
Warren Buffett of Berkshire Hathaway
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 we’re going to take a look at the new hedge fund action encompassing Globe Life Inc. (NYSE:GL).
What have hedge funds been doing with Globe Life Inc. (NYSE:GL)?
At the end of the fourth quarter, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 10% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in GL over the last 18 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Globe Life Inc. (NYSE:GL) was held by Berkshire Hathaway, which reported holding $668.7 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $56.6 million position. Other investors bullish on the company included Pzena Investment Management, Prospector Partners, and Winton Capital Management. In terms of the portfolio weights assigned to each position Prospector Partners allocated the biggest weight to Globe Life Inc. (NYSE:GL), around 3.23% of its 13F portfolio. Hi-Line Capital Management is also relatively very bullish on the stock, designating 2.48 percent of its 13F equity portfolio to GL.
Consequently, specific money managers have jumped into Globe Life Inc. (NYSE:GL) headfirst. Weld Capital Management, managed by Minhua Zhang, established the most valuable position in Globe Life Inc. (NYSE:GL). Weld Capital Management had $1.7 million invested in the company at the end of the quarter. Qing Li’s Sciencast Management also made a $1 million investment in the stock during the quarter. The other funds with new positions in the stock are Michael Gelband’s ExodusPoint Capital, Ian Simm’s Impax Asset Management, and Thomas Bailard’s Bailard Inc.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Globe Life Inc. (NYSE:GL) but similarly valued. We will take a look at Everest Re Group Ltd (NYSE:RE), PagSeguro Digital Ltd. (NYSE:PAGS), The Western Union Company (NYSE:WU), and Jack Henry & Associates, Inc. (NASDAQ:JKHY). This group of stocks’ market caps match GL’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| RE | 24 | 876907 | 1 |
| PAGS | 21 | 802176 | -15 |
| WU | 29 | 394713 | 6 |
| JKHY | 29 | 259780 | 8 |
| Average | 25.75 | 583394 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 25.75 hedge funds with bullish positions and the average amount invested in these stocks was $583 million. That figure was $861 million in GL’s case. The Western Union Company (NYSE:WU) is the most popular stock in this table. On the other hand PagSeguro Digital Ltd. (NYSE:PAGS) is the least popular one with only 21 bullish hedge fund positions. Globe Life Inc. (NYSE:GL) 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 22.3% in 2020 through March 16th but beat the market by 3.2 percentage points. Unfortunately GL wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); GL investors were disappointed as the stock returned -41% 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.
Disclosure: None. This article was originally published at Insider Monkey.
