Should I Avoid Unum Group (UNM)?

After several tireless days we have finished crunching the numbers from nearly 900 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms’ equity portfolios as of June 30th. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards Unum Group (NYSE:UNM).

Unum Group (NYSE:UNM) investors should be aware of a decrease in hedge fund interest in recent months. Unum Group (NYSE:UNM) was in 23 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 33. Our calculations also showed that UNM 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.

Sander Gerber of Hudson Bay Capital Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium 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. Keeping this in mind let’s take a look at the key hedge fund action regarding Unum Group (NYSE:UNM).

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

Heading into the third quarter of 2021, a total of 23 of the hedge funds tracked by Insider Monkey were long this stock, a change of -30% from the first quarter of 2020. On the other hand, there were a total of 22 hedge funds with a bullish position in UNM 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.

Among these funds, Arrowstreet Capital held the most valuable stake in Unum Group (NYSE:UNM), which was worth $124 million at the end of the second quarter. On the second spot was AQR Capital Management which amassed $48.5 million worth of shares. Schonfeld Strategic Advisors, Two Sigma Advisors, and Prana Capital 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 Prana Capital Management allocated the biggest weight to Unum Group (NYSE:UNM), around 1.86% of its 13F portfolio. Quantinno Capital is also relatively very bullish on the stock, setting aside 0.67 percent of its 13F equity portfolio to UNM.

Judging by the fact that Unum Group (NYSE:UNM) has faced a decline in interest from the aggregate hedge fund industry, logic holds that there lies a certain “tier” of fund managers who were dropping their entire stakes in the second quarter. Intriguingly, Renaissance Technologies dropped the biggest investment of the 750 funds watched by Insider Monkey, comprising about $3.8 million in stock. Richard SchimeláandáLawrence Sapanski’s fund, Cinctive Capital Management, also dropped its stock, about $3.3 million worth. These moves are important to note, as total hedge fund interest dropped by 10 funds in the second quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Unum Group (NYSE:UNM) but similarly valued. We will take a look at Ardagh Group S.A. (NYSE:ARD), Nextera Energy Partners LP (NYSE:NEP), CoreSite Realty Corp (NYSE:COR), Element Solutions Inc. (NYSE:ESI), Amkor Technology, Inc. (NASDAQ:AMKR), Q2 Holdings Inc (NYSE:QTWO), and Alteryx, Inc. (NYSE:AYX). This group of 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 20.7 hedge funds with bullish positions and the average amount invested in these stocks was $333 million. That figure was $324 million in UNM’s case. Alteryx, Inc. (NYSE:AYX) is the most popular stock in this table. On the other hand Ardagh Group S.A. (NYSE:ARD) is the least popular one with only 13 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 40.9. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 24% in 2021 through October 22nd and beat the market again by 1.6 percentage points. Unfortunately UNM wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on UNM were disappointed as the stock returned -0.8% since the end of June (through 10/22) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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