Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors' consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Voya Financial Inc (NYSE:VOYA).
Is Voya Financial Inc (NYSE:VOYA) undervalued? Prominent investors are becoming less confident. The number of long hedge fund bets shrunk by 11 in recent months. Our calculations also showed that VOYA 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). VOYA was in 32 hedge funds' portfolios at the end of the first quarter of 2020. There were 43 hedge funds in our database with VOYA positions at the end of the previous quarter. Video: Watch our video about the top 5 most popular hedge fund stocks.
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 monthly stock picks returned 87% since March 2017 and outperformed the S&P 500 ETFs by more than 51 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
[caption id="attachment_338852" align="aligncenter" width="399"] Richard S. Pzena of Pzena Investment Management[/caption]
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. Now let's go over the new hedge fund action encompassing Voya Financial Inc (NYSE:VOYA).
What have hedge funds been doing with Voya Financial Inc (NYSE:VOYA)?
At Q1's end, a total of 32 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -26% from one quarter earlier. On the other hand, there were a total of 45 hedge funds with a bullish position in VOYA a year ago. With the smart money's sentiment swirling, there exists a few notable hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).
More specifically, Pzena Investment Management was the largest shareholder of Voya Financial Inc (NYSE:VOYA), with a stake worth $222.8 million reported as of the end of September. Trailing Pzena Investment Management was Samlyn Capital, which amassed a stake valued at $172.5 million. Point72 Asset Management, Impax Asset Management, and Millennium 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 Samlyn Capital allocated the biggest weight to Voya Financial Inc (NYSE:VOYA), around 4.35% of its 13F portfolio. Capital Returns Management is also relatively very bullish on the stock, earmarking 4.22 percent of its 13F equity portfolio to VOYA.
Because Voya Financial Inc (NYSE:VOYA) has witnessed bearish sentiment from hedge fund managers, logic holds that there is a sect of hedgies who were dropping their full holdings last quarter. Interestingly, Louis Bacon's Moore Global Investments sold off the largest investment of the "upper crust" of funds tracked by Insider Monkey, comprising close to $18.3 million in stock. George McCabe's fund, Portolan Capital Management, also dropped its stock, about $13.5 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest dropped by 11 funds last quarter.
Let's now take a look at hedge fund activity in other stocks similar to Voya Financial Inc (NYSE:VOYA). We will take a look at Ascendis Pharma A/S (NASDAQ:ASND), Douglas Emmett, Inc. (NYSE:DEI), China Southern Airlines Co Ltd (NYSE:ZNH), and James Hardie Industries plc (NYSE:JHX). This group of stocks' market caps resemble VOYA's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ASND,33,2201133,-5 DEI,22,526330,3 ZNH,2,7964,-1 JHX,4,6976,1 Average,15.25,685601,-0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.25 hedge funds with bullish positions and the average amount invested in these stocks was $686 million. That figure was $617 million in VOYA's case. Ascendis Pharma A/S (NASDAQ:ASND) is the most popular stock in this table. On the other hand China Southern Airlines Co Ltd (NYSE:ZNH) is the least popular one with only 2 bullish hedge fund positions. Voya Financial Inc (NYSE:VOYA) is not the most popular stock in this group but hedge fund interest is still above average. 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 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 but beat the market by 13.2 percentage points. Unfortunately VOYA wasn't nearly as popular as these 10 stocks and hedge funds that were betting on VOYA were disappointed as the stock returned 11.5% during the same time period 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 many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.