With the third-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the fourth quarter. One of these stocks was Marsh & McLennan Companies, Inc. (NYSE:MMC).
Is Marsh & McLennan Companies, Inc. (NYSE:MMC) a good stock to buy now? The smart money is getting more bullish. The number of bullish hedge fund bets advanced by 7 recently. Our calculations also showed that MMC isn’t among the 30 most popular stocks among hedge funds.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 market by 18 percentage points since May 2014 through December 3, 2018 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
Let’s view the key hedge fund action surrounding Marsh & McLennan Companies, Inc. (NYSE:MMC).
What does the smart money think about Marsh & McLennan Companies, Inc. (NYSE:MMC)?
Heading into the fourth quarter of 2018, a total of 29 of the hedge funds tracked by Insider Monkey were long this stock, a change of 32% from the previous quarter. By comparison, 31 hedge funds held shares or bullish call options in MMC heading into this year. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Diamond Hill Capital was the largest shareholder of Marsh & McLennan Companies, Inc. (NYSE:MMC), with a stake worth $205.6 million reported as of the end of September. Trailing Diamond Hill Capital was Polar Capital, which amassed a stake valued at $139.1 million. Adage Capital Management, Markel Gayner Asset Management, and International Value Advisers were also very fond of the stock, giving the stock large weights in their portfolios.
As aggregate interest increased, key money managers were breaking ground themselves. PEAK6 Capital Management, managed by Matthew Hulsizer, established the most valuable position in Marsh & McLennan Companies, Inc. (NYSE:MMC). PEAK6 Capital Management had $4.1 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP also initiated a $2.1 million position during the quarter. The following funds were also among the new MMC investors: Matthew Tewksbury’s Stevens Capital Management, Nick Thakore’s Diametric Capital, and Frederick DiSanto’s Ancora Advisors.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Marsh & McLennan Companies, Inc. (NYSE:MMC) but similarly valued. These stocks are Canadian Imperial Bank of Commerce (NYSE:CM), The Progressive Corporation (NYSE:PGR), Constellation Brands, Inc. (NYSE:STZ), and Altaba Inc. (NASDAQ:AABA). This group of stocks’ market caps match MMC’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CM | 14 | 496095 | 2 |
| PGR | 45 | 2625308 | 5 |
| STZ | 61 | 6313926 | -1 |
| AABA | 87 | 16329027 | -8 |
| Average | 51.75 | 6441089 | -0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 51.75 hedge funds with bullish positions and the average amount invested in these stocks was $6.44 billion. That figure was $642 million in MMC’s case. Altaba Inc. (NASDAQ:AABA) is the most popular stock in this table. On the other hand Canadian Imperial Bank of Commerce (NYSE:CM) is the least popular one with only 14 bullish hedge fund positions. Marsh & McLennan Companies, Inc. (NYSE:MMC) 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 AABA might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
