Hedge funds and other investment firms run by legendary investors like Israel Englander, Jeffrey Talpins and Ray Dalio are entrusted to manage billions of dollars of accredited investors' money because they are without peer in the resources they use to identify the best investments for their chosen investment horizon. Moreover, they are more willing to invest a greater amount of their resources in small-cap stocks than big brokerage houses, and this is often where they generate their outperformance, which is why we pay particular attention to their best ideas in this space.
Unum Group (NYSE:UNM) shares haven't seen a lot of action during the first quarter. Overall, hedge fund sentiment was unchanged. The stock was in 25 hedge funds' portfolios at the end of the first quarter of 2019. At the end of this article we will also compare UNM to other stocks including The Middleby Corporation (NASDAQ:MIDD), Companhia de Saneamento Básico do Estado de São Paulo - SABESP (NYSE:SBS), and PRA Health Sciences Inc (NASDAQ:PRAH) to get a better sense of its popularity.
To most shareholders, hedge funds are seen as unimportant, outdated investment vehicles of the past. While there are over 8000 funds with their doors open at present, We choose to focus on the bigwigs of this club, approximately 750 funds. These money managers oversee most of all hedge funds' total capital, and by paying attention to their unrivaled equity investments, Insider Monkey has uncovered several investment strategies that have historically surpassed the S&P 500 index. Insider Monkey's flagship hedge fund strategy exceeded the S&P 500 index by around 5 percentage points annually since its inception in May 2014 through the end of May. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 30.9% since February 2017 (through May 30th) even though the market was up nearly 24% during the same period. We just shared a list of 5 short targets in our latest quarterly update and they are already down an average of 11.9% in less than a couple of weeks whereas our long picks outperformed the market by 2 percentage points in this volatile 2 week period.
We're going to review the fresh hedge fund action encompassing Unum Group (NYSE:UNM).
What does the smart money think about Unum Group (NYSE:UNM)?
At the end of the first quarter, a total of 25 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the fourth quarter of 2018. On the other hand, there were a total of 28 hedge funds with a bullish position in UNM 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.
The largest stake in Unum Group (NYSE:UNM) was held by Arrowstreet Capital, which reported holding $61 million worth of stock at the end of March. It was followed by AQR Capital Management with a $51 million position. Other investors bullish on the company included Two Sigma Advisors, Millennium Management, and Renaissance Technologies.
Due to the fact that Unum Group (NYSE:UNM) has witnessed declining sentiment from the aggregate hedge fund industry, we can see that there were a few hedge funds that slashed their full holdings heading into Q3. It's worth mentioning that John D. Gillespie's Prospector Partners dumped the biggest stake of all the hedgies tracked by Insider Monkey, totaling about $2.2 million in stock, and Ray Dalio's Bridgewater Associates was right behind this move, as the fund cut about $1.6 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Unum Group (NYSE:UNM) but similarly valued. These stocks are The Middleby Corporation (NASDAQ:MIDD), Companhia de Saneamento Básico do Estado de São Paulo - SABESP (NYSE:SBS), PRA Health Sciences Inc (NASDAQ:PRAH), and Ceridian HCM Holding Inc. (NYSE:CDAY). All of these stocks' market caps resemble UNM's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MIDD,20,656010,3 SBS,16,330259,-1 PRAH,28,411788,3 CDAY,30,987099,13 Average,23.5,596289,4.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 23.5 hedge funds with bullish positions and the average amount invested in these stocks was $596 million. That figure was $373 million in UNM's case. Ceridian HCM Holding Inc. (NYSE:CDAY) is the most popular stock in this table. On the other hand Companhia de Saneamento Básico do Estado de São Paulo - SABESP (NYSE:SBS) is the least popular one with only 16 bullish hedge fund positions. Unum Group (NYSE:UNM) 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 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately UNM wasn't nearly as popular as these 20 stocks and hedge funds that were betting on UNM were disappointed as the stock returned -2.9% during the same 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 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.