There are several ways to beat the market, and investing in small cap stocks has historically been one of them. We like to improve the odds of beating the market further by examining what famous hedge fund operators such as Carl Icahn and George Soros think. Those hedge fund operators make billions of dollars each year by hiring the best and the brightest to do research on stocks, including small cap stocks that big brokerage houses simply don't cover. Because of Carl Icahn and other elite funds' exemplary historical records, we pay attention to their small cap picks. In this article, we use hedge fund filing data to analyze The Hartford Financial Services Group, Inc. (NYSE:HIG).
Hedge fund ownership of The Hartford Financial Services Group, Inc. (NYSE:HIG) was flat during the third quarter, which is largely in line with how hedge funds have played this stock for years; they mostly hold it and forget about it, while happily collecting its dividend payments, which have been raised by 200% over the past six years. While it failed to rank among the 30 Most Popular Stocks Among Hedge Funds, it did finish a very strong 5th place among the 20 Dividend Stocks That Billionaires Are Piling On.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 17.4% year to date and outperformed the market by more than 14 percentage points this year. This strategy also outperformed the market by 3 percentage points in the fourth quarter despite the market volatility (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
How have hedgies been trading The Hartford Financial Services Group, Inc. (NYSE:HIG)?
At the end of the third quarter, a total of 37 of the hedge funds tracked by Insider Monkey were bullish on this stock, unchanged from the previous quarter. By comparison, 32 hedge funds held shares or bullish call options in HIG heading into this year. With hedgies' sentiment swirling, there exists a few noteworthy hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
The largest stake in The Hartford Financial Services Group, Inc. (NYSE:HIG) was held by Diamond Hill Capital, which reported holding $192.7 million worth of stock at the end of September. It was followed by Balyasny Asset Management with a $177.6 million position. Other investors bullish on the company included Citadel Investment Group, D E Shaw, and Millennium Management.
Seeing as The Hartford Financial Services Group, Inc. (NYSE:HIG) has witnessed falling interest from the aggregate hedge fund industry, we can see that there lies a certain "tier" of fund managers that slashed their positions entirely heading into Q3. Interestingly, Steven Richman's East Side Capital (RR Partners) cut the biggest stake of the 700 funds monitored by Insider Monkey, valued at about $106.8 million in stock. Daniel Johnson's fund, Gillson Capital, also dumped its stock, about $29.3 million worth. These transactions 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 The Hartford Financial Services Group, Inc. (NYSE:HIG) but similarly valued. These stocks are Cheniere Energy, Inc. (NYSEAMEX:LNG), Magna International Inc. (USA) (NYSE:MGA), Credicorp Ltd. (NYSE:BAP), and Textron Inc. (NYSE:TXT). This group of stocks' market values resemble HIG's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LNG,42,5973125,1 MGA,20,413773,-4 BAP,15,824239,0 TXT,26,596915,1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 26 hedge funds with bullish positions and the average amount invested in these stocks was $1.95 billion. That figure was $1.51 billion in HIG's case. Cheniere Energy, Inc. (NYSEAMEX:LNG) is the most popular stock in this table. On the other hand Credicorp Ltd. (NYSE:BAP) is the least popular one with only 15 bullish hedge fund positions. The Hartford Financial Services Group, Inc. (NYSE:HIG) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal and we like the billionaire interest in this stock as well, which should make it an intriguing choice for any dividend investors.
Disclosure: None. This article was originally published at Insider Monkey.