Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed over the past few years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that hedge funds do have great stock picking skills, so let’s take a glance at the smart money sentiment towards ProAssurance Corporation (NYSE:PRA).
ProAssurance Corporation (NYSE:PRA) investors should be aware of a decrease in activity from the world’s largest hedge funds lately. Our calculations also showed that pra isn’t among the 30 most popular stocks among hedge funds.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (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 24% through December 3, 2018. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We’re going to take a glance at the new hedge fund action encompassing ProAssurance Corporation (NYSE:PRA).
What does the smart money think about ProAssurance Corporation (NYSE:PRA)?
Heading into the fourth quarter of 2018, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -7% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards PRA over the last 13 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were upping their holdings substantially (or already accumulated large positions).
More specifically, Royce & Associates was the largest shareholder of ProAssurance Corporation (NYSE:PRA), with a stake worth $74.6 million reported as of the end of September. Trailing Royce & Associates was Diamond Hill Capital, which amassed a stake valued at $55.3 million. Renaissance Technologies, Polar Capital, and Millennium Management were also very fond of the stock, giving the stock large weights in their portfolios.
Judging by the fact that ProAssurance Corporation (NYSE:PRA) has faced falling interest from the aggregate hedge fund industry, it’s safe to say that there exists a select few hedge funds who were dropping their entire stakes last quarter. It’s worth mentioning that John Overdeck and David Siegel’s Two Sigma Advisors sold off the biggest investment of all the hedgies monitored by Insider Monkey, totaling an estimated $1.8 million in stock. Matthew Hulsizer’s fund, PEAK6 Capital Management, also sold off its stock, about $0.2 million worth. These bearish behaviors are important to note, as total hedge fund interest fell by 1 funds last quarter.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as ProAssurance Corporation (NYSE:PRA) but similarly valued. We will take a look at Urban Edge Properties (NYSE:UE), Apollo Commercial Real Est. Finance Inc (NYSE:ARI), Mantech International Corp (NASDAQ:MANT), and Pebblebrook Hotel Trust (NYSE:PEB). All of these stocks’ market caps are closest to PRA’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| UE | 12 | 75334 | 2 |
| ARI | 7 | 20599 | 2 |
| MANT | 14 | 21437 | 2 |
| PEB | 11 | 106107 | 0 |
| Average | 11 | 55869 | 1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $56 million. That figure was $212 million in PRA’s case. Mantech International Corp (NASDAQ:MANT) is the most popular stock in this table. On the other hand Apollo Commercial Real Est. Finance Inc (NYSE:ARI) is the least popular one with only 7 bullish hedge fund positions. ProAssurance Corporation (NYSE:PRA) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard MANT might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
