Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 817 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about Marsh & McLennan Companies, Inc. (NYSE:MMC) in this article.
Is MMC a good stock to buy now? Money managers were getting less bullish. The number of bullish hedge fund positions fell by 3 lately. Marsh & McLennan Companies, Inc. (NYSE:MMC) was in 35 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 38. Our calculations also showed that MMC isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). There were 38 hedge funds in our database with MMC positions at the end of the second quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
At the moment there are tons of formulas investors employ to grade their holdings. Some of the most useful formulas are hedge fund and insider trading signals. Our researchers have shown that, historically, those who follow the best picks of the top fund managers can trounce the S&P 500 by a healthy margin (see the details here).
Michael Gelband of ExodusPoint Capital
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind let’s analyze the recent hedge fund action encompassing Marsh & McLennan Companies, Inc. (NYSE:MMC).
Do Hedge Funds Think MMC Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 35 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -8% from the second quarter of 2020. The graph below displays the number of hedge funds with bullish position in MMC over the last 21 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Diamond Hill Capital was the largest shareholder of Marsh & McLennan Companies, Inc. (NYSE:MMC), with a stake worth $189.4 million reported as of the end of September. Trailing Diamond Hill Capital was Polar Capital, which amassed a stake valued at $153.4 million. Arrowstreet Capital, Intermede Investment Partners, and Markel Gayner Asset Management 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 Bishop Rock Capital allocated the biggest weight to Marsh & McLennan Companies, Inc. (NYSE:MMC), around 5.57% of its 13F portfolio. 3G Sahana Capital Management is also relatively very bullish on the stock, dishing out 4.96 percent of its 13F equity portfolio to MMC.
Due to the fact that Marsh & McLennan Companies, Inc. (NYSE:MMC) has witnessed falling interest from hedge fund managers, it’s easy to see that there is a sect of fund managers that slashed their full holdings heading into Q4. Interestingly, Greg Poole’s Echo Street Capital Management dropped the largest position of the 750 funds tracked by Insider Monkey, valued at about $55 million in stock. Steve Cohen’s fund, Point72 Asset Management, also said goodbye to its stock, about $33.1 million worth. These transactions are important to note, as aggregate hedge fund interest fell by 3 funds heading into Q4.
Let’s go over 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 The Southern Company (NYSE:SO), Ecolab Inc. (NYSE:ECL), Intercontinental Exchange Inc (NYSE:ICE), Takeda Pharmaceutical Company Limited (NYSE:TAK), The Progressive Corporation (NYSE:PGR), Humana Inc (NYSE:HUM), and Boston Scientific Corporation (NYSE:BSX). This group of stocks’ market caps are similar to MMC’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SO | 25 | 305510 | -13 |
| ECL | 52 | 2270732 | 6 |
| ICE | 64 | 2904596 | 4 |
| TAK | 19 | 733854 | 1 |
| PGR | 47 | 1692254 | -3 |
| HUM | 61 | 4804339 | -12 |
| BSX | 61 | 2536996 | -5 |
| Average | 47 | 2178326 | -3.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 47 hedge funds with bullish positions and the average amount invested in these stocks was $2178 million. That figure was $841 million in MMC’s case. Intercontinental Exchange Inc (NYSE:ICE) is the most popular stock in this table. On the other hand Takeda Pharmaceutical Company Limited (NYSE:TAK) is the least popular one with only 19 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 47.4. 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. 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 percentage points. These stocks gained 33.3% in 2020 through December 18th and surpassed the market again by 16.4 percentage points. Unfortunately MMC wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); MMC investors were disappointed as the stock returned 1.8% since the end of September (through 12/18) 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 2020.
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Disclosure: None. This article was originally published at Insider Monkey.
