We are still in an overall bull market and many stocks that smart money investors were piling into surged through October 17th. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 45% and 39% respectively. Hedge funds' top 3 stock picks returned 34.4% this year and beat the S&P 500 ETFs by 13 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like Employers Holdings, Inc. (NYSE:EIG).
Is Employers Holdings, Inc. (NYSE:EIG) a buy, sell, or hold? Investors who are in the know are selling. The number of long hedge fund positions retreated by 1 recently. Our calculations also showed that EIG isn't among the 30 most popular stocks among hedge funds (see the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let's take a peek at the fresh hedge fund action regarding Employers Holdings, Inc. (NYSE:EIG).
How have hedgies been trading Employers Holdings, Inc. (NYSE:EIG)?
At Q2's end, a total of 16 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -6% from one quarter earlier. By comparison, 16 hedge funds held shares or bullish call options in EIG a year ago. With hedge funds' positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).
The largest stake in Employers Holdings, Inc. (NYSE:EIG) was held by GLG Partners, which reported holding $18.6 million worth of stock at the end of March. It was followed by Renaissance Technologies with a $17.6 million position. Other investors bullish on the company included AQR Capital Management, Millennium Management, and Two Sigma Advisors.
Because Employers Holdings, Inc. (NYSE:EIG) has witnessed bearish sentiment from the aggregate hedge fund industry, logic holds that there exists a select few hedgies that decided to sell off their positions entirely last quarter. Interestingly, Paul Marshall and Ian Wace's Marshall Wace LLP dumped the largest investment of the "upper crust" of funds monitored by Insider Monkey, worth an estimated $1.3 million in stock. Andrew Feldstein and Stephen Siderow's fund, Blue Mountain Capital, also cut its stock, about $0.7 million worth. These transactions are intriguing to say the least, as total hedge fund interest was cut by 1 funds last quarter.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Employers Holdings, Inc. (NYSE:EIG) but similarly valued. These stocks are Silk Road Medical, Inc. (NASDAQ:SILK), Constellium SE (NYSE:CSTM), Frontline Ltd (NYSE:FRO), and Industrial Logistics Properties Trust (NASDAQ:ILPT). All of these stocks' market caps are closest to EIG's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SILK,11,66260,11 CSTM,37,341497,-4 FRO,13,76629,3 ILPT,9,86585,-7 Average,17.5,142743,0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.5 hedge funds with bullish positions and the average amount invested in these stocks was $143 million. That figure was $89 million in EIG's case. Constellium SE (NYSE:CSTM) is the most popular stock in this table. On the other hand Industrial Logistics Properties Trust (NASDAQ:ILPT) is the least popular one with only 9 bullish hedge fund positions. Employers Holdings, Inc. (NYSE:EIG) 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on EIG, though not to the same extent, as the stock returned 3.6% during the third quarter and outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.