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Did Hedge Funds Drop The Ball On Sun Life Financial Inc. (SLF) ?

Nina Todic

The Insider Monkey team has completed processing the quarterly 13F filings for the June quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Sun Life Financial Inc. (NYSE:SLF).

Hedge fund interest in Sun Life Financial Inc. (NYSE:SLF) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare SLF to other stocks including FleetCor Technologies, Inc. (NYSE:FLT), Veeva Systems Inc (NYSE:VEEV), and Cerner Corporation (NASDAQ:CERN) to get a better sense of its popularity.

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. Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Dmitry Balyasny

Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We're going to go over the key hedge fund action surrounding Sun Life Financial Inc. (NYSE:SLF).

What does smart money think about Sun Life Financial Inc. (NYSE:SLF)?

At the end of the second quarter, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. On the other hand, there were a total of 12 hedge funds with a bullish position in SLF 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.

No of Hedge Funds with SLF Positions

More specifically, Arrowstreet Capital was the largest shareholder of Sun Life Financial Inc. (NYSE:SLF), with a stake worth $53.2 million reported as of the end of March. Trailing Arrowstreet Capital was GLG Partners, which amassed a stake valued at $38.3 million. Two Sigma Advisors, Balyasny Asset Management, and D E Shaw were also very fond of the stock, giving the stock large weights in their portfolios.

Seeing as Sun Life Financial Inc. (NYSE:SLF) has faced a decline in interest from the aggregate hedge fund industry, logic holds that there was a specific group of money managers who sold off their full holdings by the end of the second quarter. Intriguingly, Cliff Asness's AQR Capital Management said goodbye to the largest stake of all the hedgies watched by Insider Monkey, totaling close to $25.7 million in stock. Jeffrey Talpins's fund, Element Capital Management, also dumped its stock, about $1 million worth. These moves are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Sun Life Financial Inc. (NYSE:SLF) but similarly valued. These stocks are FleetCor Technologies, Inc. (NYSE:FLT), Veeva Systems Inc (NYSE:VEEV), Cerner Corporation (NASDAQ:CERN), and Pioneer Natural Resources Company (NYSE:PXD). This group of stocks' market valuations resemble SLF's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FLT,40,1863052,6 VEEV,35,1355258,8 CERN,29,1211492,0 PXD,48,841904,-7 Average,38,1317927,1.75 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 38 hedge funds with bullish positions and the average amount invested in these stocks was $1318 million. That figure was $184 million in SLF's case. Pioneer Natural Resources Company (NYSE:PXD) is the most popular stock in this table. On the other hand Cerner Corporation (NASDAQ:CERN) is the least popular one with only 29 bullish hedge fund positions. Compared to these stocks Sun Life Financial Inc. (NYSE:SLF) is even less popular than CERN. Hedge funds clearly dropped the ball on SLF as the stock delivered strong returns, though hedge funds' consensus picks still generated respectable returns. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on SLF as the stock returned 9.4% during the third quarter and outperformed the market by an even larger margin. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

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

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