Is EMC Insurance Group Inc. (NASDAQ:EMCI) a good bet right now? We like to analyze hedge fund sentiment before doing days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds' picks don't beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
EMC Insurance Group Inc. (NASDAQ:EMCI) shareholders have witnessed an increase in hedge fund sentiment lately. Our calculations also showed that EMCI isn't among the 30 most popular stocks among hedge funds.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (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 27.5% through March 12, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We're going to view the new hedge fund action regarding EMC Insurance Group Inc. (NASDAQ:EMCI).
How have hedgies been trading EMC Insurance Group Inc. (NASDAQ:EMCI)?
At the end of the fourth quarter, a total of 5 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 150% from the previous quarter. By comparison, 4 hedge funds held shares or bullish call options in EMCI a year ago. With hedge funds' capital changing hands, there exists an "upper tier" of noteworthy hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
More specifically, Renaissance Technologies was the largest shareholder of EMC Insurance Group Inc. (NASDAQ:EMCI), with a stake worth $10.2 million reported as of the end of December. Trailing Renaissance Technologies was Capital Returns Management, which amassed a stake valued at $8.5 million. Millennium Management, GLG Partners, and Marshall Wace LLP were also very fond of the stock, giving the stock large weights in their portfolios.
As aggregate interest increased, specific money managers were breaking ground themselves. Capital Returns Management, managed by Ron Bobman, created the biggest position in EMC Insurance Group Inc. (NASDAQ:EMCI). Capital Returns Management had $8.5 million invested in the company at the end of the quarter. Noam Gottesman's GLG Partners also made a $0.7 million investment in the stock during the quarter. The only other fund with a new position in the stock is Paul Marshall and Ian Wace's Marshall Wace LLP.
Let's check out hedge fund activity in other stocks similar to EMC Insurance Group Inc. (NASDAQ:EMCI). We will take a look at Unity Biotechnology, Inc. (NASDAQ:UBX), Banco Latinoamericano de Comercio Exterior, S.A. (NYSE:BLX), Tailored Brands, Inc. (NYSE:TLRD), and GeoVax Labs, Inc. (NYSE:GOV). This group of stocks' market valuations are similar to EMCI's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position UBX,2,29221,-2 BLX,1,3668,0 TLRD,18,66325,-5 GOV,13,26690,-2 Average,8.5,31476,-2.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.5 hedge funds with bullish positions and the average amount invested in these stocks was $31 million. That figure was $21 million in EMCI's case. Tailored Brands, Inc. (NYSE:TLRD) is the most popular stock in this table. On the other hand Banco Latinoamericano de Comercio Exterior, S.A. (NYSE:BLX) is the least popular one with only 1 bullish hedge fund positions. EMC Insurance Group Inc. (NASDAQ:EMCI) 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 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately EMCI wasn't nearly as popular as these 15 stock (hedge fund sentiment was quite bearish); EMCI investors were disappointed as the stock returned 0.4% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.