Is UNM Stock A Buy or Sell?

While the market driven by short-term sentiment influenced by the accommodative interest rate environment in the US, virus news and stimulus spending, many smart money investors are starting to get cautious towards the current bull run since March and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Unum Group (NYSE:UNM).

Is UNM stock a buy? Unum Group (NYSE:UNM) has experienced an increase in enthusiasm from smart money lately. Unum Group (NYSE:UNM) was in 25 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 30. Our calculations also showed that UNM isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Hedge funds have more than $3 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 124 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.

Noam Gottesman of GLG Partners

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, auto parts business is a recession resistant business, so we are taking a closer look at this discount auto parts stock that is growing at a 196% annualized rate. We go through lists like the 15 best micro-cap stocks to buy now to identify the next stock with 10x upside potential. 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 take a glance at the recent hedge fund action encompassing Unum Group (NYSE:UNM).

Do Hedge Funds Think UNM Is A Good Stock To Buy Now?

At Q4’s end, a total of 25 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 14% from the third quarter of 2020. The graph below displays the number of hedge funds with bullish position in UNM over the last 22 quarters. With the smart money’s capital changing hands, there exists a few key hedge fund managers who were upping their stakes significantly (or already accumulated large positions).

Among these funds, Arrowstreet Capital held the most valuable stake in Unum Group (NYSE:UNM), which was worth $96.8 million at the end of the fourth quarter. On the second spot was Two Sigma Advisors which amassed $31.6 million worth of shares. AQR Capital Management, GLG Partners, and Millennium 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 Algert Global allocated the biggest weight to Unum Group (NYSE:UNM), around 0.74% of its 13F portfolio. P.A.W. CAPITAL PARTNERS is also relatively very bullish on the stock, designating 0.61 percent of its 13F equity portfolio to UNM.

Now, key hedge funds were breaking ground themselves. Adage Capital Management, managed by Phill Gross and Robert Atchinson, established the most outsized position in Unum Group (NYSE:UNM). Adage Capital Management had $5.1 million invested in the company at the end of the quarter. Peter Seuss’s Prana Capital Management also made a $1.8 million investment in the stock during the quarter. The other funds with new positions in the stock are Greg Eisner’s Engineers Gate Manager, Peter A. Wright’s P.A.W. CAPITAL PARTNERS, and Jinghua Yan’s TwinBeech Capital.

Let’s check out hedge fund activity in other stocks similar to Unum Group (NYSE:UNM). These stocks are Houlihan Lokey Inc (NYSE:HLI), SLM Corp (NASDAQ:SLM), Exponent, Inc. (NASDAQ:EXPO), Grupo Televisa SAB (NYSE:TV), Affiliated Managers Group, Inc. (NYSE:AMG), Goosehead Insurance, Inc. (NASDAQ:GSHD), and 21Vianet Group Inc (NASDAQ:VNET). All of these stocks’ market caps are closest to UNM’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 23 hedge funds with bullish positions and the average amount invested in these stocks was $460 million. That figure was $218 million in UNM’s case. 21Vianet Group Inc (NASDAQ:VNET) is the most popular stock in this table. On the other hand Exponent, Inc. (NASDAQ:EXPO) is the least popular one with only 15 bullish hedge fund positions. Unum Group (NYSE:UNM) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for UNM is 60.8. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.3% in 2021 through April 19th and still beat the market by 0.9 percentage points. Hedge funds were also right about betting on UNM as the stock returned 28.4% since the end of Q4 (through 4/19) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

Disclosure: None. This article was originally published at Insider Monkey.