Here is What Hedge Funds Think About RLI Corp. (RLI)

Is RLI Corp. (NYSE:RLI) a healthy stock for your portfolio? The smart money is getting less bullish. The number of long hedge fund positions dropped by 1 in recent months.

To most stock holders, hedge funds are viewed as underperforming, old financial vehicles of the past. While there are over 8000 funds trading at present, we at Insider Monkey hone in on the top tier of this club, about 450 funds. Most estimates calculate that this group oversees the majority of the smart money’s total asset base, and by watching their top investments, we have formulated a few investment strategies that have historically outpaced the broader indices. Our small-cap hedge fund strategy beat the S&P 500 index by 18 percentage points annually for a decade in our back tests, and since we’ve started sharing our picks with our subscribers at the end of August 2012, we have outpaced the S&P 500 index by 23.3 percentage points in 8 months (check out a sample of our picks).

Just as integral, positive insider trading activity is a second way to parse down the world of equities. There are a variety of stimuli for a corporate insider to get rid of shares of his or her company, but just one, very simple reason why they would initiate a purchase. Several empirical studies have demonstrated the useful potential of this method if “monkeys” know where to look (learn more here).

With these “truths” under our belt, it’s important to take a peek at the recent action regarding RLI Corp. (NYSE:RLI).

What have hedge funds been doing with RLI Corp. (NYSE:RLI)?

In preparation for this quarter, a total of 5 of the hedge funds we track held long positions in this stock, a change of -17% from the first quarter. With the smart money’s capital changing hands, there exists a select group of notable hedge fund managers who were boosting their stakes considerably.

Of the funds we track, Tom Gayner’s Markel Gayner Asset Management had the largest position in RLI Corp. (NYSE:RLI), worth close to $44 million, accounting for 1.6% of its total 13F portfolio. Sitting at the No. 2 spot is Chuck Royce of Royce & Associates, with a $10.5 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other hedgies with similar optimism include Brian Ashford-Russell and Tim Woolley’s Polar Capital, Cliff Asness’s AQR Capital Management and Israel Englander’s Millennium Management.

Since RLI Corp. (NYSE:RLI) has faced falling interest from the aggregate hedge fund industry, we can see that there was a specific group of money managers that elected to cut their positions entirely in Q1. It’s worth mentioning that Ken Griffin’s Citadel Investment Group sold off the largest position of all the hedgies we track, comprising close to $0.7 million in stock. These bearish behaviors are intriguing to say the least, as total hedge fund interest fell by 1 funds in Q1.

What do corporate executives and insiders think about RLI Corp. (NYSE:RLI)?

Insider buying is particularly usable when the company in focus has seen transactions within the past half-year. Over the latest six-month time period, RLI Corp. (NYSE:RLI) has experienced zero unique insiders purchasing, and 1 insider sales (see the details of insider trades here).

Let’s also take a look at hedge fund and insider activity in other stocks similar to RLI Corp. (NYSE:RLI). These stocks are Kemper Corporation (NYSE:KMPR), Platinum Underwriters Holdings, Ltd. (NYSE:PTP), Radian Group Inc (NYSE:RDN), Selective Insurance Group (NASDAQ:SIGI), and Montpelier Re Holdings Ltd. (NYSE:MRH). This group of stocks belong to the property & casualty insurance industry and their market caps resemble RLI’s market cap.