Like everyone else, elite investors make mistakes. Some of their top consensus picks, such as Amazon, Facebook and Alibaba, have not done well in Q4 due to various reasons. Nevertheless, the data show elite investors' consensus picks have done well on average over the long-term. The top 20 stocks among hedge funds beat the S&P 500 Index ETF by more than 6 percentage points so far this year. Because their consensus picks have done well, we pay attention to what elite funds think before doing extensive research on a stock. In this article, we take a closer look at W.R. Berkley Corporation (NYSE:WRB) from the perspective of those elite funds.
W.R. Berkley Corporation (NYSE:WRB) has seen a decrease in hedge fund sentiment of late. WRB was in 18 hedge funds' portfolios at the end of the first quarter of 2019. There were 23 hedge funds in our database with WRB positions at the end of the previous quarter. Our calculations also showed that wrb 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' 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 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Let's analyze the latest hedge fund action encompassing W.R. Berkley Corporation (NYSE:WRB).
What does the smart money think about W.R. Berkley Corporation (NYSE:WRB)?
At the end of the first quarter, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of -22% from the fourth quarter of 2018. By comparison, 20 hedge funds held shares or bullish call options in WRB a year ago. With hedge funds' sentiment swirling, there exists a select group of notable hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).
Among these funds, Polar Capital held the most valuable stake in W.R. Berkley Corporation (NYSE:WRB), which was worth $76.2 million at the end of the first quarter. On the second spot was AQR Capital Management which amassed $40.1 million worth of shares. Moreover, Renaissance Technologies, Balyasny Asset Management, and GAMCO Investors were also bullish on W.R. Berkley Corporation (NYSE:WRB), allocating a large percentage of their portfolios to this stock.
Because W.R. Berkley Corporation (NYSE:WRB) has experienced declining sentiment from the smart money, we can see that there lies a certain "tier" of hedgies that decided to sell off their full holdings heading into Q3. Intriguingly, D. E. Shaw's D E Shaw sold off the largest position of the "upper crust" of funds monitored by Insider Monkey, valued at an estimated $0.6 million in stock, and Richard Chilton's Chilton Investment Company was right behind this move, as the fund dropped about $0.6 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest dropped by 5 funds heading into Q3.
Let's go over hedge fund activity in other stocks similar to W.R. Berkley Corporation (NYSE:WRB). These stocks are Open Text Corporation (NASDAQ:OTEX), Federal Realty Investment Trust (NYSE:FRT), Equity Lifestyle Properties, Inc. (NYSE:ELS), and Braskem SA (NYSE:BAK). This group of stocks' market caps are closest to WRB's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position OTEX,22,791223,2 FRT,17,226357,0 ELS,15,571959,0 BAK,12,310632,3 Average,16.5,475043,1.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.5 hedge funds with bullish positions and the average amount invested in these stocks was $475 million. That figure was $253 million in WRB's case. Open Text Corporation (NASDAQ:OTEX) is the most popular stock in this table. On the other hand Braskem SA (NYSE:BAK) is the least popular one with only 12 bullish hedge fund positions. W.R. Berkley Corporation (NYSE:WRB) is not the most popular stock in this group but hedge fund interest is still above average. 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. Hedge funds were also right about betting on WRB as the stock returned 9.8% during the same period and outperformed the market by an even larger margin. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.