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In this article we will check out the progression of hedge fund sentiment towards Hartford Financial Services Group Inc (NYSE:HIG) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Is HIG stock a buy? Hedge fund interest in Hartford Financial Services Group Inc (NYSE:HIG) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that HIG isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings). The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as NICE Ltd (NASDAQ:NICE), GDS Holdings Limited (NASDAQ:GDS), and Ubiquiti Inc. (NYSE:UI) to gather more data points.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017 (see the details here).
Andreas Halvorsen of Viking Global
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 10 best battery stocks to buy to identify the next stock with 10x upside potential. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind we're going to check out the new hedge fund action surrounding Hartford Financial Services Group Inc (NYSE:HIG).
Do Hedge Funds Think HIG Is A Good Stock To Buy Now?
At Q4's end, a total of 36 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards HIG over the last 22 quarters. With hedge funds' positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were upping their holdings considerably (or already accumulated large positions).
The largest stake in Hartford Financial Services Group Inc (NYSE:HIG) was held by Viking Global, which reported holding $395.3 million worth of stock at the end of December. It was followed by Diamond Hill Capital with a $350.2 million position. Other investors bullish on the company included D E Shaw, Citadel Investment Group, and Arrowstreet Capital. In terms of the portfolio weights assigned to each position Prana Capital Management allocated the biggest weight to Hartford Financial Services Group Inc (NYSE:HIG), around 2.79% of its 13F portfolio. Diamond Hill Capital is also relatively very bullish on the stock, dishing out 1.65 percent of its 13F equity portfolio to HIG.
Seeing as Hartford Financial Services Group Inc (NYSE:HIG) has experienced a decline in interest from hedge fund managers, we can see that there exists a select few hedge funds that slashed their full holdings last quarter. Interestingly, Anand Parekh's Alyeska Investment Group dumped the largest position of the "upper crust" of funds monitored by Insider Monkey, worth close to $13.7 million in stock. Joe DiMenna's fund, ZWEIG DIMENNA PARTNERS, also sold off its stock, about $8.8 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's go over hedge fund activity in other stocks similar to Hartford Financial Services Group Inc (NYSE:HIG). We will take a look at NICE Ltd (NASDAQ:NICE), GDS Holdings Limited (NASDAQ:GDS), Ubiquiti Inc. (NYSE:UI), CMS Energy Corporation (NYSE:CMS), China Unicom (Hong Kong) Limited (NYSE:CHU), CNH Industrial NV (NYSE:CNHI), and Bio-Rad Laboratories, Inc. (NYSE:BIO). This group of stocks' market valuations are closest to HIG's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NICE,26,726097,0 GDS,39,2874120,-8 UI,19,319456,-1 CMS,24,580991,-5 CHU,6,42062,0 CNHI,16,442785,-2 BIO,42,1117926,-6 Average,24.6,871920,-3.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.6 hedge funds with bullish positions and the average amount invested in these stocks was $872 million. That figure was $1560 million in HIG's case. Bio-Rad Laboratories, Inc. (NYSE:BIO) is the most popular stock in this table. On the other hand China Unicom (Hong Kong) Limited (NYSE:CHU) is the least popular one with only 6 bullish hedge fund positions. Hartford Financial Services Group Inc (NYSE:HIG) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for HIG is 67.8. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 7.9% in 2021 through April 1st and still beat the market by 0.4 percentage points. Hedge funds were also right about betting on HIG as the stock returned 40.4% since the end of Q4 (through 4/1) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.