Should You Buy The Hartford Financial Services Group, Inc. (HIG)?

We at Insider Monkey have gone over 821 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, near the height of the coronavirus market crash. In this article, we look at what those funds think of The Hartford Financial Services Group, Inc. (NYSE:HIG) based on that data.

The Hartford Financial Services Group, Inc. (NYSE:HIG) was in 37 hedge funds’ portfolios at the end of the first quarter of 2020. HIG has seen an increase in support from the world’s most elite money managers lately. There were 34 hedge funds in our database with HIG holdings at the end of the previous quarter. Our calculations also showed that HIG isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

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 S&P 500 ETFs by more than 51 percentage points since March 2017 (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 stocks that are in our short portfolio.

Dmitry Balyasny of Balyasny Asset Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to take a look at the new hedge fund action encompassing The Hartford Financial Services Group, Inc. (NYSE:HIG).

What have hedge funds been doing with The Hartford Financial Services Group, Inc. (NYSE:HIG)?

Heading into the second quarter of 2020, a total of 37 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 9% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in HIG over the last 18 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, Ric Dillon’s Diamond Hill Capital has the number one position in The Hartford Financial Services Group, Inc. (NYSE:HIG), worth close to $171.6 million, accounting for 1.2% of its total 13F portfolio. The second most bullish fund manager is Citadel Investment Group, managed by Ken Griffin, which holds a $121 million position; 0.1% of its 13F portfolio is allocated to the company. Other members of the smart money that are bullish consist of D. E. Shaw’s D E Shaw, Cliff Asness’s AQR Capital Management and Robert Pohly’s Samlyn Capital. In terms of the portfolio weights assigned to each position Capital Returns Management allocated the biggest weight to The Hartford Financial Services Group, Inc. (NYSE:HIG), around 5.38% of its 13F portfolio. Prana Capital Management is also relatively very bullish on the stock, earmarking 3.7 percent of its 13F equity portfolio to HIG.

With a general bullishness amongst the heavyweights, key money managers have been driving this bullishness. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, created the largest position in The Hartford Financial Services Group, Inc. (NYSE:HIG). Arrowstreet Capital had $37.7 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also made a $30.7 million investment in the stock during the quarter. The other funds with brand new HIG positions are Dmitry Balyasny’s Balyasny Asset Management, Paul Marshall and Ian Wace’s Marshall Wace LLP, and Greg Eisner’s Engineers Gate Manager.

Let’s also examine hedge fund activity in other stocks similar to The Hartford Financial Services Group, Inc. (NYSE:HIG). We will take a look at CBRE Group, Inc. (NYSE:CBRE), MarketAxess Holdings Inc. (NASDAQ:MKTX), Ameriprise Financial, Inc. (NYSE:AMP), and Aptiv PLC (NYSE:APTV). This group of stocks’ market valuations are closest to HIG’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 29.75 hedge funds with bullish positions and the average amount invested in these stocks was $785 million. That figure was $708 million in HIG’s case. CBRE Group, Inc. (NYSE:CBRE) is the most popular stock in this table. On the other hand Ameriprise Financial, Inc. (NYSE:AMP) is the least popular one with only 26 bullish hedge fund positions. Compared to these stocks The Hartford Financial Services Group, Inc. (NYSE:HIG) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May and still beat the market by 13.2 percentage points. Unfortunately HIG wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on HIG were disappointed as the stock returned 9.6% during the second quarter (through the end of May) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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