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Was The Smart Money Wrong About Getting Into The Hartford Financial Services Group Inc (HIG)?

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·6 min read
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Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 823 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds' 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about The Hartford Financial Services Group Inc (NYSE:HIG) in this article.

Is The Hartford Financial Services Group Inc (NYSE:HIG) the right investment to pursue these days? Investors who are in the know were turning bullish. The number of long hedge fund positions advanced by 2 in recent months. The Hartford Financial Services Group Inc (NYSE:HIG) was in 39 hedge funds' portfolios at the end of the second quarter of 2020. The all time high for this statistics is 51. Our calculations also showed that HIG isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). There were 37 hedge funds in our database with HIG positions at the end of the first quarter.

Video: Watch our video about the top 5 most popular hedge fund stocks.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 56 percentage points since March 2017 (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 34% through August 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Ric Dillon Diamond Hill Capital
Ric Dillon Diamond Hill Capital

Ric Dillon of Diamond Hill Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Our analysis determined that presidential election polls were wrong heading into the 2020 election and we were able to make the most accurate predictions in the country after making adjustments for the biases in existing polls. For example we predicted comfortable Trump victories in Florida, North Carolina, Texas, Iowa, and Ohio. We also predicted a very narrow Biden victory of 0.4 points in Wisconsin when most pollsters were predicting 8 to 10 points Biden victories. We are waiting for the results of 5 more states, but our accuracy rate so far is 100% (see our predictions). You can subscribe to our free daily newsletter on our website to get email alerts whenever we publish an interesting article. Now let's analyze the fresh hedge fund action regarding The Hartford Financial Services Group Inc (NYSE:HIG).

Hedge fund activity in The Hartford Financial Services Group Inc (NYSE:HIG)

At the end of June, a total of 39 of the hedge funds tracked by Insider Monkey were long this stock, a change of 5% from one quarter earlier. By comparison, 30 hedge funds held shares or bullish call options in HIG a year ago. With the smart money's positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).

The largest stake in The Hartford Financial Services Group Inc (NYSE:HIG) was held by Diamond Hill Capital, which reported holding $183.6 million worth of stock at the end of June. It was followed by D E Shaw with a $179.2 million position. Other investors bullish on the company included Citadel Investment Group, Samlyn Capital, and Arrowstreet Capital. In terms of the portfolio weights assigned to each position Prana Capital Management allocated the biggest weight to The Hartford Financial Services Group Inc (NYSE:HIG), around 5.41% of its 13F portfolio. ZWEIG DIMENNA PARTNERS is also relatively very bullish on the stock, dishing out 1.28 percent of its 13F equity portfolio to HIG.

Consequently, key hedge funds have been driving this bullishness. Point72 Asset Management, managed by Steve Cohen, initiated the largest position in The Hartford Financial Services Group Inc (NYSE:HIG). Point72 Asset Management had $12.6 million invested in the company at the end of the quarter. Joe DiMenna's ZWEIG DIMENNA PARTNERS also initiated a $12.2 million position during the quarter. The other funds with brand new HIG positions are Richard SchimeláandáLawrence Sapanski's Cinctive Capital Management, David Rodriguez-Fraile's BlueMar Capital Management, and Qing Li's Sciencast Management.

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as The Hartford Financial Services Group Inc (NYSE:HIG) but similarly valued. These stocks are Tyler Technologies, Inc. (NYSE:TYL), ONEOK, Inc. (NYSE:OKE), Pembina Pipeline Corp (NYSE:PBA), Fifth Third Bancorp (NASDAQ:FITB), Ventas, Inc. (NYSE:VTR), Zebra Technologies Corporation (NASDAQ:ZBRA), and Teva Pharmaceutical Industries Limited (NYSE:TEVA). This group of stocks' market caps match HIG's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TYL,36,533929,6 OKE,25,117132,0 PBA,10,89252,-5 FITB,32,354887,2 VTR,21,167092,-4 ZBRA,38,788710,10 TEVA,31,1286113,2 Average,27.6,476731,1.6 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 27.6 hedge funds with bullish positions and the average amount invested in these stocks was $477 million. That figure was $918 million in HIG's case. Zebra Technologies Corporation (NASDAQ:ZBRA) is the most popular stock in this table. On the other hand Pembina Pipeline Corp (NYSE:PBA) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks The Hartford Financial Services Group Inc (NYSE:HIG) is more popular among hedge funds. Our overall hedge fund sentiment score for HIG is 79.9. 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 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 23% in 2020 through October 30th and still beat the market by 20.1 percentage points. Unfortunately HIG wasn't nearly as popular as these 10 stocks and hedge funds that were betting on HIG were disappointed as the stock returned 0.7% since the end of the second quarter (through 10/30) 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 most of these stocks already outperformed the market in 2020.

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Disclosure: None. This article was originally published at Insider Monkey.

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