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StanCorp Financial Group, Inc. (SFG) Jumps 48% On Japan-Based Meiji Yasuda’s Takeover: Which Hedge Funds Cashed In?

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StanCorp Financial Group, Inc. (NYSE:SFG) reported its second quarter earnings in the after-hours on Thursday. The insurance provider reported earnings of $64.3 million or $1.50 per share for the quarter. The company reported earnings of $40.8 million or $0.93 per share during the same period in 2014. The insurance provider managed to easily beat the consensus expectation of $1.22 per share. The company attributed the increased income to a favorable claim experience, higher commissions, and bonuses. Year-to-date, StanCorp Financial Group, Inc. (NYSE:SFG) has reported EPS of $2.82, compared to $2.02 EPS during the first half of 2014. Looking at different business sectors: in the insurance sector, StanCorp Financial Group, Inc. (NYSE:SFG) reported total income before income taxes of $74.7 million for the second quarter, $30.7 million more than a year ago. In the Asset management sector, the company reported total income before income taxes of $24.5 million for the second quarter, a year-over-year increase of $2.5 million. In other businesses, the company reported a total loss of $9.8 million, compared to a loss of $8.7 million in the second quarter of 2014. Along with the earnings, earlier today, the Japan-based Meiji Yasuda Life Insurance Co. agreed to takeover the Oregon-based StanCorp Financial Group, Inc. (NYSE:SFG) in a deal worth $5 billion. Meiji Yasuda announced that it would pay a 50% premium on StanCorp’s closing price on Thursday. This news combined sent the stock skyrocketing by more than 48% as it started trading today. Were hedge funds expecting this? And which ones cashed in on the deal? Let’s find out.

arrow, up, rising

Heading into the second quarter, a total of seven of the hedge funds tracked by Insider Monkey held long positions in StanCorp Financial Group, Inc. (NYSE:SFG), with a total investment of $75.9 million, 5.6% lower than the total investment in the stock held by ten hedge funds at the end of 2014. Meanwhile, the stock lost 1.8% of its value during the January – March period. This shows that the hedge funds opted to pull money out of the stock during the first three months, and clearly weren’t expecting a deal like this coming down in the near future.

Most investors don’t understand hedge funds and indicators that are based on hedge fund and insider activity. They ignore hedge funds because of their recent poor performance in the long-running bull market. Our research indicates that hedge funds underperformed because they aren’t 100% long. Hedge fund fees are also very large compared to the returns generated and they reduce the net returns enjoyed (or not) by investors. We uncovered through extensive research that hedge funds’ long positions in small-cap stocks actually greatly outperformed the market from 1999 to 2012, and built a system around this. The 15 most popular small-cap stocks among funds beat the S&P 500 Index by more than 80 percentage points since the end of August 2012 when this system went live, returning a cumulative 139.7% vs. 58.7% for the S&P 500 Index (read the details).

Likewise, other research (not our own) has shown insider purchases are also effective piggybacking methods for investors that lead to greater returns. That’s why we believe investors should pay attention to what hedge funds and insiders are buying and keep them apprised of this information. Looking at StanCorp Financial Group, Inc. (NYSE:SFG), there have been no insider purchases of the stock this year, but there have been a few insider sales. Senior Vice President at StanCorp, David O’Brien sold around 13,000 shares and Vice President of the Asset Management Group, James Harbolt, sold around 6,800 shares this year.

With all of this in mind, let’s take a look at the latest action surrounding StanCorp Financial Group, Inc. (NYSE:SFG).

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