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Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that's why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can't match. So should one consider investing in Chubb Limited (NYSE:CB)? The smart money sentiment can provide an answer to this question.
Chubb Limited (NYSE:CB) was in 42 hedge funds' portfolios at the end of the second quarter of 2021. The all time high for this statistic is 50. CB investors should be aware of an increase in activity from the world's largest hedge funds lately. There were 41 hedge funds in our database with CB holdings at the end of March. Our calculations also showed that CB isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).
In today’s marketplace there are a multitude of metrics stock traders have at their disposal to value publicly traded companies. Two of the less utilized metrics are hedge fund and insider trading interest. We have shown that, historically, those who follow the top picks of the best fund managers can beat the broader indices by a healthy margin (see the details here). Also, our monthly newsletter's portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website.
Cliff Asness of AQR Capital Management
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, artificial intelligence is one of the fastest-growing industries right now, so we are checking out stock pitches like this emerging AI stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. With all of this in mind we're going to review the key hedge fund action regarding Chubb Limited (NYSE:CB).
Do Hedge Funds Think CB Is A Good Stock To Buy Now?
Heading into the third quarter of 2021, a total of 42 of the hedge funds tracked by Insider Monkey were long this stock, a change of 2% from one quarter earlier. On the other hand, there were a total of 40 hedge funds with a bullish position in CB a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Viking Global held the most valuable stake in Chubb Limited (NYSE:CB), which was worth $782 million at the end of the second quarter. On the second spot was Polar Capital which amassed $189.2 million worth of shares. AQR Capital Management, Adage Capital 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 Cobalt Capital Management allocated the biggest weight to Chubb Limited (NYSE:CB), around 2.79% of its 13F portfolio. Viking Global is also relatively very bullish on the stock, designating 2.37 percent of its 13F equity portfolio to CB.
As industrywide interest jumped, specific money managers were breaking ground themselves. Renaissance Technologies, initiated the most outsized position in Chubb Limited (NYSE:CB). Renaissance Technologies had $25.2 million invested in the company at the end of the quarter. Wayne Cooperman's Cobalt Capital Management also made a $7.9 million investment in the stock during the quarter. The other funds with brand new CB positions are Qing Li's Sciencast Management, John Overdeck and David Siegel's Two Sigma Advisors, and Brandon Haley's Holocene Advisors.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Chubb Limited (NYSE:CB) but similarly valued. We will take a look at Baidu, Inc. (NASDAQ:BIDU), Westpac Banking Corporation (NYSE:WBK), Fiserv, Inc. (NASDAQ:FISV), Becton, Dickinson and Company (NYSE:BDX), Illinois Tool Works Inc. (NYSE:ITW), Capital One Financial Corp. (NYSE:COF), and Illumina, Inc. (NASDAQ:ILMN). This group of stocks' market values are closest to CB's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BIDU,59,3474215,-30 WBK,4,38055,1 FISV,72,2655395,-3 BDX,52,3335441,-13 ITW,45,657608,12 COF,64,4053972,5 ILMN,51,1973287,-1 Average,49.6,2312568,-4.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 49.6 hedge funds with bullish positions and the average amount invested in these stocks was $2313 million. That figure was $1738 million in CB's case. Fiserv, Inc. (NASDAQ:FISV) is the most popular stock in this table. On the other hand Westpac Banking Corporation (NYSE:WBK) is the least popular one with only 4 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. Our overall hedge fund sentiment score for CB is 59.1. 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. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 22.9% in 2021 through October 1st and still beat the market by 5.6 percentage points. A small number of hedge funds were also right about betting on CB as the stock returned 10.8% since the end of the second quarter (through 10/1) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.