The third quarter was a rough one for most investors, as fears of an interest rate hike in the U.S, a weakening economy in China, and a stagnant Europe, weighed heavily on the minds of investors. Both the S&P 500 and Russell 2000 sank as a result, with the Russell 2000, which is composed of smaller companies, being hit especially hard. This was primarily due to hedge funds, which are big supporters of small-cap stocks, pulling some of their capital out of the volatile markets during this time. Let’s look at how this market volatility affected the sentiment of hedge funds towards Voya Financial Inc (NYSE:VOYA), and what that likely means for the prospects of the company and its stock.
Is Voya Financial Inc (NYSE:VOYA) a healthy stock for your portfolio? Hedge funds are becoming less hopeful. The number of bullish hedge fund positions fell by 5 in recent months. VOYA was in 35 hedge funds’ portfolios at the end of the third quarter of 2015. There were 40 hedge funds in our database with VOYA holdings at the end of the previous quarter. At the end of this article we will also compare VOYA to other stocks, including Alkermes Plc (NASDAQ:ALKS), Shaw Communications Inc (USA) (NYSE:SJR), and Darden Restaurants, Inc. (NYSE:DRI) to get a better sense of its popularity.
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In the eyes of most stock holders, hedge funds are seen as slow, outdated financial tools of the past. While there are over an 8000 funds trading today, Our experts choose to focus on the upper echelon of this club, approximately 700 funds. These investment experts watch over the majority of the smart money’s total asset base, and by monitoring their inimitable investments, Insider Monkey has deciphered several investment strategies that have historically outrun the S&P 500 index. Insider Monkey’s small-cap hedge fund strategy surpassed the S&P 500 index by 12 percentage points per annum for a decade in their back tests.
Now, let’s take a look at the key action encompassing Voya Financial Inc (NYSE:VOYA).
How have hedgies been trading Voya Financial Inc (NYSE:VOYA)?
Heading into Q4, a total of 35 of the hedge funds tracked by Insider Monkey were long this stock, a change of -13% from the second quarter. With hedge funds’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Pzena Investment Management, managed by Richard S. Pzena, holds the largest position in Voya Financial Inc (NYSE:VOYA). Pzena Investment Management has a $286.6 million position in the stock, comprising 1.8% of its 13F portfolio. The second most bullish fund is D E Shaw, with a $168.8 million position; 0.2% of its 13F portfolio is allocated to the company. Remaining hedge funds and institutional investors with similar optimism encompass David Einhorn’s Greenlight Capital, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and Larry Robbins’ Glenview Capital.
Judging by the fact that Voya Financial Inc (NYSE:VOYA) has experienced a bearish sentiment from the aggregate hedge fund industry, we can see that there is a sect of funds who were dropping their positions entirely heading into Q4. Interestingly, Christian Leone’s Luxor Capital Group said goodbye to the biggest investment of all the hedgies followed by Insider Monkey, comprising an estimated $73.4 million in stock. John Overdeck and David Siegel’s fund, Two Sigma Advisors, also dropped its stock, about $34.2 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest was cut by 5 funds heading into Q4.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Voya Financial Inc (NYSE:VOYA) but similarly valued. These stocks are Alkermes Plc (NASDAQ:ALKS), Shaw Communications Inc (USA) (NYSE:SJR), Darden Restaurants, Inc. (NYSE:DRI), and Amdocs Limited (NYSE:DOX). All of these stocks’ market caps match VOYA’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ALKS | 22 | 523173 | -3 |
| SJR | 15 | 150967 | 3 |
| DRI | 33 | 1354857 | -5 |
| DOX | 26 | 603157 | 5 |
As you can see these stocks had an average of 24 hedge funds with bullish positions and the average amount invested in these stocks was $658 million. That figure was $1.10 billion in VOYA’s case. Darden Restaurants, Inc. (NYSE:DRI) is the most popular stock in this table with 33 funds disclosing positions and Shaw Communications Inc (USA) (NYSE:SJR) is the least popular one. Compared to these stocks, Voya Financial Inc (NYSE:VOYA) is more popular among hedge funds, despite the drop in the number of funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
