White Mountains Insurance Group Ltd (WTM): Hedge Funds Are Bearish and Insiders Are Bullish, What Should You Do?

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White Mountains Insurance Group Ltd (NYSE:WTM) shareholders have witnessed a decrease in hedge fund sentiment of late.

In the eyes of most investors, hedge funds are viewed as slow, old investment tools of yesteryear. While there are more than 8000 funds with their doors open at present, we at Insider Monkey hone in on the moguls of this club, around 450 funds. It is widely believed that this group oversees the majority of the hedge fund industry’s total capital, and by watching their highest performing equity investments, we have uncovered a few investment strategies that have historically beaten the market. Our small-cap hedge fund strategy outperformed the S&P 500 index by 18 percentage points a year for a decade in our back tests, and since we’ve started sharing our picks with our subscribers at the end of August 2012, we have outpaced the S&P 500 index by 23.3 percentage points in 8 months (explore the details and some picks here).

Just as beneficial, optimistic insider trading sentiment is another way to parse down the marketplace. Just as you’d expect, there are lots of stimuli for an executive to cut shares of his or her company, but only one, very simple reason why they would buy. Several empirical studies have demonstrated the useful potential of this tactic if investors know what to do (learn more here).

Now, we’re going to take a glance at the latest action encompassing White Mountains Insurance Group Ltd (NYSE:WTM).

What does the smart money think about White Mountains Insurance Group Ltd (NYSE:WTM)?

In preparation for this quarter, a total of 9 of the hedge funds we track were bullish in this stock, a change of -25% from one quarter earlier. With the smart money’s capital changing hands, there exists an “upper tier” of notable hedge fund managers who were upping their holdings considerably.

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When looking at the hedgies we track, Martin Whitman’s Third Avenue Management had the largest position in White Mountains Insurance Group Ltd (NYSE:WTM), worth close to $149 million, comprising 2.9% of its total 13F portfolio. Coming in second is Jim Simons of Renaissance Technologies, with a $8.1 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other hedgies that hold long positions include D. E. Shaw’s D E Shaw, Chuck Royce’s Royce & Associates and David Costen Haley’s HBK Investments.

Seeing as White Mountains Insurance Group Ltd (NYSE:WTM) has witnessed declining sentiment from the smart money, it’s easy to see that there was a specific group of hedge funds who were dropping their full holdings at the end of the first quarter. Interestingly, Ric Dillon’s Diamond Hill Capital sold off the biggest stake of the 450+ funds we watch, comprising an estimated $3.6 million in stock.. Ben Levine Andrew Manuel and Stefan Renold’s fund, LMR Partners, also dumped its stock, about $1 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest fell by 3 funds at the end of the first quarter.

How have insiders been trading White Mountains Insurance Group Ltd (NYSE:WTM)?

Insider trading activity, especially when it’s bullish, is particularly usable when the company in focus has seen transactions within the past six months. Over the latest six-month time frame, White Mountains Insurance Group Ltd (NYSE:WTM) has seen 1 unique insiders buying, and 2 insider sales (see the details of insider trades here).

Let’s also take a look at hedge fund and insider activity in other stocks similar to White Mountains Insurance Group Ltd (NYSE:WTM). These stocks are HCC Insurance Holdings, Inc. (NYSE:HCC), American Financial Group (NYSE:AFG), Validus Holdings, Ltd. (NYSE:VR), RenaissanceRe Holdings Ltd. (NYSE:RNR), and Allied World Assurance Co Holdings, AG. (NYSE:AWH). This group of stocks are in the property & casualty insurance industry and their market caps match WTM’s market cap.

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