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Hedge Funds Have Never Been This Bullish On Erie Indemnity Company (ERIE)

Nina Todic

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We have processed the filings of the more than 700 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their March 31 holdings, data that is available nowhere else. Should you consider Erie Indemnity Company (NASDAQ:ERIE) for your portfolio? We'll look to this invaluable collective wisdom for the answer.

Erie Indemnity Company (NASDAQ:ERIE) was in 17 hedge funds' portfolios at the end of March. ERIE investors should pay attention to an increase in hedge fund interest recently. There were 11 hedge funds in our database with ERIE positions at the end of the previous quarter. Our calculations also showed that erie isn't among the 30 most popular stocks among hedge funds.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.

Chuck Royce

We're going to take a look at the latest hedge fund action surrounding Erie Indemnity Company (NASDAQ:ERIE).

What does smart money think about Erie Indemnity Company (NASDAQ:ERIE)?

Heading into the second quarter of 2019, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 55% from the fourth quarter of 2018. On the other hand, there were a total of 11 hedge funds with a bullish position in ERIE a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with ERIE Positions

More specifically, Royce & Associates was the largest shareholder of Erie Indemnity Company (NASDAQ:ERIE), with a stake worth $38.9 million reported as of the end of March. Trailing Royce & Associates was Renaissance Technologies, which amassed a stake valued at $23.1 million. Citadel Investment Group, AQR Capital Management, and Millennium Management were also very fond of the stock, giving the stock large weights in their portfolios.

As aggregate interest increased, some big names have jumped into Erie Indemnity Company (NASDAQ:ERIE) headfirst. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, created the most valuable position in Erie Indemnity Company (NASDAQ:ERIE). Marshall Wace LLP had $3.1 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital also initiated a $2.2 million position during the quarter. The other funds with new positions in the stock are Michael Platt and William Reeves's BlueCrest Capital Mgmt., Peter Muller's PDT Partners, and Michael Gelband's ExodusPoint Capital.

Let's also examine hedge fund activity in other stocks similar to Erie Indemnity Company (NASDAQ:ERIE). These stocks are F5 Networks, Inc. (NASDAQ:FFIV), Okta, Inc. (NASDAQ:OKTA), Alliance Data Systems Corporation (NYSE:ADS), and MarketAxess Holdings Inc. (NASDAQ:MKTX). All of these stocks' market caps are similar to ERIE's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FFIV,24,1046558,0 OKTA,43,995674,3 ADS,38,1907491,-1 MKTX,15,218079,-2 Average,30,1041951,0 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 30 hedge funds with bullish positions and the average amount invested in these stocks was $1042 million. That figure was $99 million in ERIE's case. Okta, Inc. (NASDAQ:OKTA) is the most popular stock in this table. On the other hand MarketAxess Holdings Inc. (NASDAQ:MKTX) is the least popular one with only 15 bullish hedge fund positions. Erie Indemnity Company (NASDAQ:ERIE) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. A small number of hedge funds were also right about betting on ERIE as the stock returned 42.3% during the same time frame and outperformed the market by an even larger margin.

Disclosure: None. This article was originally published at Insider Monkey.

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