The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn't the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds' positions on March 31st, about a week after the S&P 500 Index bottomed. We at Insider Monkey have made an extensive database of more than 821 of those established hedge funds and famous value investors' filings. In this article, we analyze how these elite funds and prominent investors traded The Hanover Insurance Group, Inc. (NYSE:THG) based on those filings.
Is The Hanover Insurance Group, Inc. (NYSE:THG) a buy right now? The smart money is becoming more confident. The number of long hedge fund positions moved up by 3 lately. Our calculations also showed that THG isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). Video: Watch our video about the top 5 most popular hedge fund stocks.
To the average investor there are tons of signals investors use to size up stocks. Some of the most underrated signals are hedge fund and insider trading activity. Our researchers have shown that, historically, those who follow the best picks of the top fund managers can beat the S&P 500 by a significant margin (see the details here).
[caption id="attachment_338852" align="aligncenter" width="400"] Richard S. Pzena of Pzena Investment Management[/caption]
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like these. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let's go over the new hedge fund action surrounding The Hanover Insurance Group, Inc. (NYSE:THG).
Hedge fund activity in The Hanover Insurance Group, Inc. (NYSE:THG)
At Q1's end, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 14% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards THG over the last 18 quarters. With the smart money's sentiment swirling, there exists a few notable hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).
The largest stake in The Hanover Insurance Group, Inc. (NYSE:THG) was held by AQR Capital Management, which reported holding $37.5 million worth of stock at the end of September. It was followed by Two Sigma Advisors with a $18.7 million position. Other investors bullish on the company included Pzena Investment Management, Millennium Management, and Gillson Capital. In terms of the portfolio weights assigned to each position Prospector Partners allocated the biggest weight to The Hanover Insurance Group, Inc. (NYSE:THG), around 1.42% of its 13F portfolio. Gillson Capital is also relatively very bullish on the stock, designating 1.39 percent of its 13F equity portfolio to THG.
As one would reasonably expect, some big names have jumped into The Hanover Insurance Group, Inc. (NYSE:THG) headfirst. Renaissance Technologies, established the most valuable position in The Hanover Insurance Group, Inc. (NYSE:THG). Renaissance Technologies had $6 million invested in the company at the end of the quarter. Greg Eisner's Engineers Gate Manager also made a $5 million investment in the stock during the quarter. The other funds with brand new THG positions are Mika Toikka's AlphaCrest Capital Management, Ken Griffin's Citadel Investment Group, and Alec Litowitz and Ross Laser's Magnetar Capital.
Let's also examine hedge fund activity in other stocks similar to The Hanover Insurance Group, Inc. (NYSE:THG). We will take a look at Switch, Inc. (NYSE:SWCH), TCF Financial Corporation (NYSE:TCF), Emcor Group Inc (NYSE:EME), and Ormat Technologies, Inc. (NYSE:ORA). All of these stocks' market caps are similar to THG's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SWCH,24,394487,6 TCF,19,100615,-5 EME,24,201184,-5 ORA,9,164907,-7 Average,19,215298,-2.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $215 million. That figure was $135 million in THG's case. Switch, Inc. (NYSE:SWCH) is the most popular stock in this table. On the other hand Ormat Technologies, Inc. (NYSE:ORA) is the least popular one with only 9 bullish hedge fund positions. The Hanover Insurance Group, Inc. (NYSE:THG) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.9% in 2020 through June 10th but beat the market by 14.2 percentage points. Unfortunately THG wasn't nearly as popular as these 10 stocks and hedge funds that were betting on THG were disappointed as the stock returned 21.5% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.