The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn't the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds' positions on March 31st, about a week after the S&P 500 Index bottomed. We at Insider Monkey have made an extensive database of more than 821 of those established hedge funds and famous value investors' filings. In this article, we analyze how these elite funds and prominent investors traded Chubb Limited (NYSE:CB) based on those filings.
Chubb Limited (NYSE:CB) was in 33 hedge funds' portfolios at the end of the first quarter of 2020. CB has experienced an increase in support from the world's most elite money managers lately. There were 24 hedge funds in our database with CB positions at the end of the previous quarter. Our calculations also showed that CB 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.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_673876" align="aligncenter" width="399"] John Overdeck of Two Sigma Advisors[/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. Keeping this in mind we're going to take a look at the recent hedge fund action surrounding Chubb Limited (NYSE:CB).
Hedge fund activity in Chubb Limited (NYSE:CB)
At the end of the first quarter, a total of 33 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 38% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in CB over the last 18 quarters. With the smart money's capital changing hands, there exists a select group of key hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).
Among these funds, Citadel Investment Group held the most valuable stake in Chubb Limited (NYSE:CB), which was worth $178.9 million at the end of the third quarter. On the second spot was Polar Capital which amassed $133.1 million worth of shares. AQR Capital Management, Viking Global, and Adage Capital 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 Spindletop Capital allocated the biggest weight to Chubb Limited (NYSE:CB), around 4.05% of its 13F portfolio. Prana Capital Management is also relatively very bullish on the stock, dishing out 2.58 percent of its 13F equity portfolio to CB.
With a general bullishness amongst the heavyweights, key hedge funds were breaking ground themselves. Viking Global, managed by Andreas Halvorsen, assembled the most valuable position in Chubb Limited (NYSE:CB). Viking Global had $102.6 million invested in the company at the end of the quarter. Anthony Bozza's Lakewood Capital Management also made a $26.4 million investment in the stock during the quarter. The other funds with new positions in the stock are Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital, Peter Seuss's Prana Capital Management, and John Overdeck and David Siegel's Two Sigma Advisors.
Let's go over hedge fund activity in other stocks similar to Chubb Limited (NYSE:CB). We will take a look at The Bank of Nova Scotia (NYSE:BNS), Uber Technologies, Inc. (NYSE:UBER), Takeda Pharmaceutical Company Limited (NYSE:TAK), and Micron Technology, Inc. (NASDAQ:MU). This group of stocks' market caps resemble CB's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BNS,12,240173,-4 UBER,97,5084706,3 TAK,22,734533,-6 MU,94,3990785,5 Average,56.25,2512549,-0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 56.25 hedge funds with bullish positions and the average amount invested in these stocks was $2513 million. That figure was $691 million in CB's case. Uber Technologies, Inc. (NYSE:UBER) is the most popular stock in this table. On the other hand The Bank of Nova Scotia (NYSE:BNS) is the least popular one with only 12 bullish hedge fund positions. Chubb Limited (NYSE:CB) is not the least popular stock in this group but hedge fund interest is still below average. 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 8.3% in 2020 through the end of May and surpassed the market by 13.2 percentage points. Unfortunately CB wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); CB investors were disappointed as the stock returned 9.2% during the second quarter 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.