At Insider Monkey, we pore over the filings of more than 700 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of September 30. In this article, we will use that wealth of knowledge to determine whether or not ProAssurance Corporation (NYSE:PRA) makes for a good investment right now.
ProAssurance Corporation (NYSE:PRA) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 14 hedge funds’ portfolios at the end of the third quarter of 2015. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity, but it may still be less popular than similarly priced stocks. That’s why at the end of this article, we will examine companies such as Valero Energy Partners LP (NYSE:VLP), Aaron’s, Inc. (NYSE:AAN), and Store Capital Corp (NYSE:STOR) to gather more data points.
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To most traders, hedge funds are viewed as underperforming, old investment vehicles of years past. While there are more than 8000 funds with their doors open at present, Our researchers look at the moguls of this club, approximately 700 funds. These money managers shepherd the lion’s share of the hedge fund industry’s total asset base, and by tracking their matchless stock picks, Insider Monkey has found several investment strategies that have historically outpaced the market. Insider Monkey’s small-cap hedge fund strategy exceeded the S&P 500 index by 12 percentage points per year for a decade in their back tests.
Now, let’s take a look at the fresh action encompassing ProAssurance Corporation (NYSE:PRA).
How have hedgies been trading ProAssurance Corporation (NYSE:PRA)?
At the end of Q3, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, unchanged from the second quarter. With hedge funds’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Polar Capital, managed by Brian Ashford-Russell and Tim Woolley, holds the most valuable position in ProAssurance Corporation (NYSE:PRA). Polar Capital has a $17.2 million position in the stock, comprising 0.3% of its 13F portfolio. Coming in second is Cliff Asness of AQR Capital Management, with a $14.6 million position; less than 0.1% of its 13F portfolio is allocated to the company. Other hedge funds and institutional investors that are bullish comprise Ken Griffin’s Citadel Investment Group, Chuck Royce’s Royce & Associates, and Renaissance Technologies.
Due to the fact that ProAssurance Corporation (NYSE:PRA) has faced a declining sentiment from hedge fund managers, we can see that there lies a certain “tier” of hedge funds who were dropping their entire stakes last quarter. It’s worth mentioning that Paul Marshall and Ian Wace’s Marshall Wace LLP dropped the largest investment of all the hedgies followed by Insider Monkey, comprising about $1.8 million in stock, and John Overdeck and David Siegel’s Two Sigma Advisors was right behind this move, as the fund dumped about $1.7 million worth. These bearish behaviors are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as ProAssurance Corporation (NYSE:PRA) but similarly valued. These stocks are Valero Energy Partners LP (NYSE:VLP), Aaron’s, Inc. (NYSE:AAN), Store Capital Corp (NYSE:STOR), and Texas Roadhouse Inc (NASDAQ:TXRH). This group of stocks’ market valuations is closest to ProAssurance Corporation (NYSE:PRA)’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| VLP | 5 | 4475 | 0 |
| AAN | 32 | 375110 | 3 |
| STOR | 7 | 1582157 | -4 |
| TXRH | 14 | 156310 | -8 |
As you can see, these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $530 million. That figure was $126 million in ProAssurance Corporation (NYSE:PRA)’s case. Aaron’s, Inc. (NYSE:AAN) is the most popular stock in this table. On the other hand, Valero Energy Partners LP (NYSE:VLP) is the least popular one with only 5 bullish hedge fund positions. ProAssurance Corporation (NYSE:PRA) 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. In this regard, Aaron’s, Inc. (NYSE:AAN) might be a better candidate to consider a long position.
