Russell 2000 ETF (IWM) lagged the larger S&P 500 ETF (SPY) by nearly 9 percentage points since the end of the third quarter of 2018 as investors worried over the possible ramifications of rising interest rates and escalation of the trade war with China. The hedge funds and institutional investors we track typically invest more in smaller-cap stocks than an average investor (i.e. only 298 S&P 500 constituents were among the 500 most popular stocks among hedge funds), and we have seen data that shows those funds paring back their overall exposure. Those funds cutting positions in small-caps is one reason why volatility has increased. In the following paragraphs, we take a closer look at what hedge funds and prominent investors think of ProAssurance Corporation (NYSE:PRA) and see how the stock is affected by the recent hedge fund activity.
ProAssurance Corporation (NYSE:PRA) was in 14 hedge funds' portfolios at the end of the first quarter of 2019. PRA has seen an increase in activity from the world's largest hedge funds in recent months. There were 13 hedge funds in our database with PRA holdings at the end of the previous quarter. Our calculations also showed that PRA isn't among the 30 most popular stocks among hedge funds.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 30.9% through May 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let's take a look at the recent hedge fund action surrounding ProAssurance Corporation (NYSE:PRA).
What does smart money think about ProAssurance Corporation (NYSE:PRA)?
Heading into the second quarter of 2019, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 8% from the previous quarter. By comparison, 12 hedge funds held shares or bullish call options in PRA a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Royce & Associates held the most valuable stake in ProAssurance Corporation (NYSE:PRA), which was worth $58.5 million at the end of the first quarter. On the second spot was Diamond Hill Capital which amassed $33.2 million worth of shares. Moreover, Renaissance Technologies, Polar Capital, and Citadel Investment Group were also bullish on ProAssurance Corporation (NYSE:PRA), allocating a large percentage of their portfolios to this stock.
Now, key hedge funds have been driving this bullishness. Minerva Advisors, managed by David P. Cohen, established the largest position in ProAssurance Corporation (NYSE:PRA). Minerva Advisors had $1 million invested in the company at the end of the quarter. Michael Gelband's ExodusPoint Capital also made a $0.5 million investment in the stock during the quarter. The following funds were also among the new PRA investors: Minhua Zhang's Weld Capital Management, Matthew Hulsizer's PEAK6 Capital Management, and Andrew Feldstein and Stephen Siderow's Blue Mountain Capital.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as ProAssurance Corporation (NYSE:PRA) but similarly valued. These stocks are LivePerson, Inc. (NASDAQ:LPSN), Compass Minerals International, Inc. (NYSE:CMP), QEP Resources Inc (NYSE:QEP), and Atara Biotherapeutics Inc (NASDAQ:ATRA). This group of stocks' market values match PRA's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LPSN,21,239043,4 CMP,13,100028,1 QEP,23,291990,-2 ATRA,15,672346,4 Average,18,325852,1.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 18 hedge funds with bullish positions and the average amount invested in these stocks was $326 million. That figure was $153 million in PRA's case. QEP Resources Inc (NYSE:QEP) is the most popular stock in this table. On the other hand Compass Minerals International, Inc. (NYSE:CMP) is the least popular one with only 13 bullish hedge fund positions. ProAssurance Corporation (NYSE:PRA) 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 PRA as the stock returned 8.4% during the same time frame and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.