How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding The Hartford Financial Services Group Inc (NYSE:HIG).
The Hartford Financial Services Group Inc (NYSE:HIG) has experienced a decrease in enthusiasm from smart money of late. The Hartford Financial Services Group Inc (NYSE:HIG) was in 43 hedge funds’ portfolios at the end of June. The all time high for this statistic is 57. Our calculations also showed that HIG isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 79 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Peter Rathjens of Arrowstreet Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, artificial intelligence is one of the fastest-growing industries right now, so we are checking out stock pitches like this emerging AI stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. With all of this in mind let’s go over the latest hedge fund action surrounding The Hartford Financial Services Group Inc (NYSE:HIG).
Do Hedge Funds Think HIG Is A Good Stock To Buy Now?
At the end of the second quarter, a total of 43 of the hedge funds tracked by Insider Monkey were long this stock, a change of -25% from the previous quarter. By comparison, 39 hedge funds held shares or bullish call options in HIG a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Diamond Hill Capital, managed by Ric Dillon, holds the biggest position in The Hartford Financial Services Group Inc (NYSE:HIG). Diamond Hill Capital has a $439.6 million position in the stock, comprising 1.7% of its 13F portfolio. On Diamond Hill Capital’s heels is D E Shaw, managed by D. E. Shaw, which holds a $186.8 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Some other professional money managers that hold long positions include Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Phill Gross and Robert Atchinson’s Adage Capital Management and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Prana Capital Management allocated the biggest weight to The Hartford Financial Services Group Inc (NYSE:HIG), around 3.21% of its 13F portfolio. TOMS Capital is also relatively very bullish on the stock, designating 2.91 percent of its 13F equity portfolio to HIG.
Seeing as The Hartford Financial Services Group Inc (NYSE:HIG) has faced a decline in interest from the aggregate hedge fund industry, logic holds that there is a sect of hedgies that decided to sell off their entire stakes in the second quarter. Interestingly, Andreas Halvorsen’s Viking Global dropped the largest investment of the 750 funds followed by Insider Monkey, valued at about $170.5 million in stock, and Matthew Halbower’s Pentwater Capital Management was right behind this move, as the fund cut about $34.4 million worth. These transactions are important to note, as total hedge fund interest dropped by 14 funds in the second quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as The Hartford Financial Services Group Inc (NYSE:HIG) but similarly valued. These stocks are DISH Network Corp. (NASDAQ:DISH), Qorvo Inc (NASDAQ:QRVO), Cheniere Energy, Inc. (NYSE:LNG), Martin Marietta Materials, Inc. (NYSE:MLM), Edison International (NYSE:EIX), Extra Space Storage, Inc. (NYSE:EXR), and Kellogg Company (NYSE:K). This group of stocks’ market values are closest to HIG’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| DISH | 51 | 2543355 | 0 |
| QRVO | 40 | 2300268 | -1 |
| LNG | 49 | 2944377 | 9 |
| MLM | 34 | 2014762 | -7 |
| EIX | 18 | 1386816 | -17 |
| EXR | 21 | 176013 | -7 |
| K | 32 | 482871 | 0 |
| Average | 35 | 1692637 | -3.3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 35 hedge funds with bullish positions and the average amount invested in these stocks was $1693 million. That figure was $1469 million in HIG’s case. DISH Network Corp. (NASDAQ:DISH) is the most popular stock in this table. On the other hand Edison International (NYSE:EIX) is the least popular one with only 18 bullish hedge fund positions. The Hartford Financial Services Group Inc (NYSE:HIG) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for HIG is 51.5. 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. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 22.9% in 2021 through October 1st and still beat the market by 5.6 percentage points. Hedge funds were also right about betting on HIG as the stock returned 15.2% since the end of Q2 (through 10/1) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Follow Hartford Financial Services Group Inc. (NYSE:HIG)
Follow Hartford Financial Services Group Inc. (NYSE:HIG)
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Disclosure: None. This article was originally published at Insider Monkey.
