"Market conditions are changing. The continued rise in interest rates suggests we are in the early stages of a bond bear market, which could intensify as central banks withdraw liquidity. The receding tide of liquidity will start to reveal more rocks beyond what has been exposed in emerging markets so far, and the value of a value discipline will be in avoiding the biggest capital-destroying rocks. If a rock emerges on the crowded shore of U.S. momentum, it could result in a major liquidity challenge, as momentum is often most intense on the downside as a crowded trade reverses. So investors are facing a large potential trade-off right now: continue to bet on the current dominance of momentum and the S&P 500, or bet on change and take an active value bet in names with attractive value and optionality, but with negative momentum," said Clearbridge Investments in its market commentary. We aren't sure whether long-term interest rates will top 5% and value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. This article will lay out and discuss the hedge fund and institutional investor sentiment towards Erie Indemnity Company (NASDAQ:ERIE).
Erie Indemnity Company (NASDAQ:ERIE) was in 14 hedge funds' portfolios at the end of the third quarter of 2018. ERIE shareholders have witnessed an increase in activity from the world's largest hedge funds lately. There were 10 hedge funds in our database with ERIE holdings at the end of the previous quarter. Our calculations also showed that ERIE isn't among the 30 most popular stocks among hedge funds.
In the financial world there are numerous gauges stock market investors can use to grade publicly traded companies. A duo of the most useful gauges are hedge fund and insider trading activity. Our researchers have shown that, historically, those who follow the best picks of the top investment managers can beat their index-focused peers by a significant margin (see the details here).
We're going to take a gander at the new hedge fund action surrounding Erie Indemnity Company (NASDAQ:ERIE).
Hedge fund activity in Erie Indemnity Company (NASDAQ:ERIE)
At Q3's end, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 40% from the previous quarter. By comparison, 8 hedge funds held shares or bullish call options in ERIE heading into this year. With hedge funds' positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).
The largest stake in Erie Indemnity Company (NASDAQ:ERIE) was held by Royce & Associates, which reported holding $32.7 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $23.8 million position. Other investors bullish on the company included AQR Capital Management, Citadel Investment Group, and D E Shaw.
Consequently, some big names were breaking ground themselves. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, established the biggest position in Erie Indemnity Company (NASDAQ:ERIE). Marshall Wace LLP had $1.1 million invested in the company at the end of the quarter. Michael Platt and William Reeves's BlueCrest Capital Mgmt. also initiated a $0.8 million position during the quarter. The other funds with new positions in the stock are Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital and Alec Litowitz and Ross Laser's Magnetar Capital.
Let's now take a look at hedge fund activity in other stocks similar to Erie Indemnity Company (NASDAQ:ERIE). These stocks are Fair Isaac Corporation (NYSE:FICO), Watsco Inc (NYSE:WSO), Randgold Resources Ltd. (NASDAQ:GOLD), and Hanesbrands Inc. (NYSE:HBI). All of these stocks' market caps resemble ERIE's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FICO,21,344358,-1 WSO,17,163129,4 GOLD,18,274444,7 HBI,18,550463,-7 Average,18.5,333099,0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.5 hedge funds with bullish positions and the average amount invested in these stocks was $333 million. That figure was $74 million in ERIE's case. Fair Isaac Corporation (NYSE:FICO) is the most popular stock in this table. On the other hand Watsco Inc (NYSE:WSO) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks Erie Indemnity Company (NASDAQ:ERIE) is even less popular than WSO. Considering that hedge funds aren't fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn't behind this stock. This isn't necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.
Disclosure: None. This article was originally published at Insider Monkey.