Legendary investors such as Jeffrey Talpins and Seth Klarman earn enormous amounts of money for themselves and their investors by doing in-depth research on small-cap stocks that big brokerage houses don't publish. Small cap stocks -especially when they are screened well- can generate substantial outperformance versus a boring index fund. That's why we analyze the activity of those elite funds in these small-cap stocks. In the following paragraphs, we analyze Hartford Financial Services Group Inc (NYSE:HIG) from the perspective of those elite funds.
Hartford Financial Services Group Inc (NYSE:HIG) was in 30 hedge funds' portfolios at the end of December. HIG shareholders have witnessed a decrease in hedge fund interest recently. There were 37 hedge funds in our database with HIG positions at the end of the previous quarter. Our calculations also showed that HIG isn't among the 30 most popular stocks among hedge funds. Overall hedge fund sentiment towards HIG has never been this low.
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 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 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.
We're going to check out the fresh hedge fund action regarding Hartford Financial Services Group Inc (NYSE:HIG).
How have hedgies been trading Hartford Financial Services Group Inc (NYSE:HIG)?
At Q4's end, a total of 30 of the hedge funds tracked by Insider Monkey were long this stock, a change of -19% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards HIG over the last 14 quarters. With hedge funds' sentiment swirling, there exists a select group of notable hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
More specifically, Diamond Hill Capital was the largest shareholder of Hartford Financial Services Group Inc (NYSE:HIG), with a stake worth $206.8 million reported as of the end of September. Trailing Diamond Hill Capital was D E Shaw, which amassed a stake valued at $180.7 million. Balyasny Asset Management, Two Sigma Advisors, and Millennium Management were also very fond of the stock, giving the stock large weights in their portfolios.
Seeing as Hartford Financial Services Group Inc (NYSE:HIG) has experienced falling interest from hedge fund managers, logic holds that there exists a select few funds that decided to sell off their entire stakes in the third quarter. It's worth mentioning that Andreas Halvorsen's Viking Global sold off the largest investment of all the hedgies tracked by Insider Monkey, worth close to $20 million in stock, and Glenn Russell Dubin's Highbridge Capital Management was right behind this move, as the fund dropped about $15.1 million worth. These transactions are important to note, as aggregate hedge fund interest was cut by 7 funds in the third quarter.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Hartford Financial Services Group Inc (NYSE:HIG) but similarly valued. We will take a look at Ameren Corporation (NYSE:AEE), W.W. Grainger, Inc. (NYSE:GWW), Arista Networks Inc (NYSE:ANET), and First Data Corporation (NYSE:FDC). This group of stocks' market values resemble HIG's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AEE,23,637969,2 GWW,23,260901,-7 ANET,23,512906,1 FDC,52,2229916,-9 Average,30.25,910423,-3.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 30.25 hedge funds with bullish positions and the average amount invested in these stocks was $910 million. That figure was $1245 million in HIG's case. First Data Corporation (NYSE:FDC) is the most popular stock in this table. On the other hand Ameren Corporation (NYSE:AEE) is the least popular one with only 23 bullish hedge fund positions. Hartford Financial Services Group Inc (NYSE:HIG) 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 19.7% through March 15th and outperformed the S&P 500 ETF (SPY) by 6.6 percentage points. Unfortunately HIG wasn't in this group. Hedge funds that bet on HIG were disappointed as the stock returned 10.5% and underperformed the market. If you are interested in investing in large cap stocks, you should check out the top 15 hedge fund stocks as 13 of these outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.