There are several ways to beat the market, and investing in small cap stocks has historically been one of them. We like to improve the odds of beating the market further by examining what famous hedge fund operators such as Jeff Ubben, George Soros and Carl Icahn think. Those hedge fund operators make billions of dollars each year by hiring the best and the brightest to do research on stocks, including small cap stocks that big brokerage houses simply don't cover. Because of Carl Icahn and other elite funds' exemplary historical records, we pay attention to their small cap picks. In this article, we use hedge fund filing data to analyze Travelers Companies Inc (NYSE:TRV).
Is Travelers Companies Inc (NYSE:TRV) a splendid stock to buy now? Money managers are taking a pessimistic view. The number of bullish hedge fund bets went down by 3 in recent months. Our calculations also showed that TRV isn't among the 30 most popular stocks among hedge funds (view the video below). TRV was in 26 hedge funds' portfolios at the end of the second quarter of 2019. There were 29 hedge funds in our database with TRV holdings at the end of the previous quarter. 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 some fund managers who are betting on Dow reaching 40000 in a year, 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. We're going to take a gander at the key hedge fund action surrounding Travelers Companies Inc (NYSE:TRV).
How have hedgies been trading Travelers Companies Inc (NYSE:TRV)?
Heading into the third quarter of 2019, a total of 26 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -10% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards TRV over the last 16 quarters. With hedge funds' capital changing hands, there exists a select group of notable hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Berkshire Hathaway, managed by Warren Buffett, holds the largest position in Travelers Companies Inc (NYSE:TRV). Berkshire Hathaway has a $890.9 million position in the stock, comprising 0.4% of its 13F portfolio. The second largest stake is held by AQR Capital Management, managed by Cliff Asness, which holds a $227.5 million position; the fund has 0.3% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors that hold long positions encompass Brian Ashford-Russell and Tim Woolley's Polar Capital, Tom Gayner's Markel Gayner Asset Management and John Overdeck and David Siegel's Two Sigma Advisors.
Seeing as Travelers Companies Inc (NYSE:TRV) has witnessed falling interest from the aggregate hedge fund industry, it's safe to say that there were a few funds who sold off their full holdings last quarter. At the top of the heap, Daniel Johnson's Gillson Capital sold off the largest stake of all the hedgies watched by Insider Monkey, comprising about $25.8 million in stock. Sander Gerber's fund, Hudson Bay Capital Management, also dropped its stock, about $17.1 million worth. These moves are important to note, as total hedge fund interest dropped by 3 funds last quarter.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Travelers Companies Inc (NYSE:TRV) but similarly valued. We will take a look at Worldpay, Inc. (NYSE:WP), Roper Industries, Inc. (NYSE:ROP), Edwards Lifesciences Corporation (NYSE:EW), and Delta Air Lines, Inc. (NYSE:DAL). This group of stocks' market values are closest to TRV's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WP,84,5780416,9 ROP,35,944295,13 EW,33,873482,8 DAL,70,7271037,10 Average,55.5,3717308,10 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 55.5 hedge funds with bullish positions and the average amount invested in these stocks was $3717 million. That figure was $1391 million in TRV's case. Worldpay, Inc. (NYSE:WP) is the most popular stock in this table. On the other hand Edwards Lifesciences Corporation (NYSE:EW) is the least popular one with only 33 bullish hedge fund positions. Compared to these stocks Travelers Companies Inc (NYSE:TRV) is even less popular than EW. Hedge funds dodged a bullet by taking a bearish stance towards TRV. Our calculations showed that the top 20 most popular hedge fund stocks returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately TRV wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); TRV investors were disappointed as the stock returned 0% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far in 2019.
Disclosure: None. This article was originally published at Insider Monkey.