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The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Since the end of March, investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned more than 50% since its bottom. In this article you are going to find out whether hedge funds thought The Hanover Insurance Group, Inc. (NYSE:THG) was a good investment heading into the third quarter and how the stock traded in comparison to the top hedge fund picks.
The Hanover Insurance Group, Inc. (NYSE:THG) shareholders have witnessed an increase in activity from the world's largest hedge funds lately. The Hanover Insurance Group, Inc. (NYSE:THG) was in 25 hedge funds' portfolios at the end of the second quarter of 2020. The all time high for this statistics is 28. There were 24 hedge funds in our database with THG holdings at the end of March. Our calculations also showed that THG isn't among the 30 most popular stocks among hedge funds (click for Q2 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.
In the financial world there are many indicators stock traders use to grade publicly traded companies. A pair of the less utilized indicators are hedge fund and insider trading activity. Our researchers have shown that, historically, those who follow the top picks of the elite investment managers can beat the S&P 500 by a very impressive amount (see the details here).
Richard S. Pzena of Pzena Investment Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. Now we're going to take a look at the key hedge fund action encompassing The Hanover Insurance Group, Inc. (NYSE:THG).
How are hedge funds trading The Hanover Insurance Group, Inc. (NYSE:THG)?
At the end of June, a total of 25 of the hedge funds tracked by Insider Monkey were long this stock, a change of 4% from the previous quarter. The graph below displays the number of hedge funds with bullish position in THG over the last 20 quarters. 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, Citadel Investment Group was the largest shareholder of The Hanover Insurance Group, Inc. (NYSE:THG), with a stake worth $27.9 million reported as of the end of September. Trailing Citadel Investment Group was Two Sigma Advisors, which amassed a stake valued at $20.8 million. AQR Capital Management, Prospector Partners, and Pzena Investment 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 Prospector Partners allocated the biggest weight to The Hanover Insurance Group, Inc. (NYSE:THG), around 2.11% of its 13F portfolio. Gillson Capital is also relatively very bullish on the stock, setting aside 0.84 percent of its 13F equity portfolio to THG.
Now, key money managers were leading the bulls' herd. Royce & Associates, managed by Chuck Royce, initiated the biggest position in The Hanover Insurance Group, Inc. (NYSE:THG). Royce & Associates had $6.4 million invested in the company at the end of the quarter. Parvinder Thiara's Athanor Capital also initiated a $2.4 million position during the quarter. The other funds with brand new THG positions are Michael Gelband's ExodusPoint Capital, Gregg Moskowitz's Interval Partners, and Benjamin A. Smith's Laurion Capital Management.
Let's go over hedge fund activity in other stocks similar to The Hanover Insurance Group, Inc. (NYSE:THG). We will take a look at Global Blood Therapeutics Inc (NASDAQ:GBT), Cyberark Software Ltd (NASDAQ:CYBR), ICU Medical, Inc. (NASDAQ:ICUI), Wright Medical Group N.V. (NASDAQ:WMGI), Lattice Semiconductor Corporation (NASDAQ:LSCC), Armstrong World Industries, Inc. (NYSE:AWI), and Western Alliance Bancorporation (NYSE:WAL). This group of stocks' market values are similar to THG's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GBT,31,600038,8 CYBR,17,187436,3 ICUI,32,304412,7 WMGI,38,799962,1 LSCC,19,162880,-7 AWI,34,372376,14 WAL,24,139929,-3 Average,27.9,366719,3.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 27.9 hedge funds with bullish positions and the average amount invested in these stocks was $367 million. That figure was $133 million in THG's case. Wright Medical Group N.V. (NASDAQ:WMGI) is the most popular stock in this table. On the other hand Cyberark Software Ltd (NASDAQ:CYBR) is the least popular one with only 17 bullish hedge fund positions. The Hanover Insurance Group, Inc. (NYSE:THG) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for THG is 51.8. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly negative signal and 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 21.3% in 2020 through September 25th and surpassed the market by 17.7 percentage points. Unfortunately THG wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); THG investors were disappointed as the stock returned -10% since Q2 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.
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Disclosure: None. This article was originally published at Insider Monkey.