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Did Hedge Funds Make The Right Call On Chubb Limited (CB)?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Chubb Limited (NYSE:CB) based on that data and determine whether they were really smart about the stock.

Is Chubb Limited (NYSE:CB) the right investment to pursue these days? The best stock pickers were in a bullish mood. The number of bullish hedge fund positions improved by 9 in recent months. Our calculations also showed that CB isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

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

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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 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 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Peter Rathjens Arrowstreet Capital 394

Peter Rathjens of Arrowstreet Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so we are checking out this tiny lithium stock. With all of this in mind let’s take a glance at the fresh hedge fund action encompassing Chubb Limited (NYSE:CB).

How have hedgies been trading Chubb Limited (NYSE:CB)?

At the end of the first quarter, a total of 33 of the hedge funds tracked by Insider Monkey were long this stock, a change of 38% from the previous quarter. On the other hand, there were a total of 23 hedge funds with a bullish position in CB a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Citadel Investment Group was the largest shareholder of Chubb Limited (NYSE:CB), with a stake worth $178.9 million reported as of the end of September. Trailing Citadel Investment Group was Polar Capital, which amassed a stake valued at $133.1 million. AQR Capital Management, Viking Global, and Adage Capital Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Spindletop Capital allocated the biggest weight to Chubb Limited (NYSE:CB), around 4.05% of its 13F portfolio. Prana Capital Management is also relatively very bullish on the stock, earmarking 2.58 percent of its 13F equity portfolio to CB.

Consequently, key hedge funds were breaking ground themselves. Viking Global, managed by Andreas Halvorsen, created the largest position in Chubb Limited (NYSE:CB). Viking Global had $102.6 million invested in the company at the end of the quarter. Anthony Bozza’s Lakewood Capital Management also initiated a $26.4 million position during the quarter. The other funds with new positions in the stock are Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Peter Seuss’s Prana Capital Management, and John Overdeck and David Siegel’s Two Sigma Advisors.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Chubb Limited (NYSE:CB) but similarly valued. These stocks are The Bank of Nova Scotia (NYSE:BNS), Uber Technologies, Inc. (NYSE:UBER), Takeda Pharmaceutical Company Limited (NYSE:TAK), and Micron Technology, Inc. (NASDAQ:MU). This group of stocks’ market values are closest to CB’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BNS 12 240173 -4
UBER 97 5084706 3
TAK 22 734533 -6
MU 94 3990785 5
Average 56.25 2512549 -0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 56.25 hedge funds with bullish positions and the average amount invested in these stocks was $2513 million. That figure was $691 million in CB’s case. Uber Technologies, Inc. (NYSE:UBER) is the most popular stock in this table. On the other hand The Bank of Nova Scotia (NYSE:BNS) is the least popular one with only 12 bullish hedge fund positions. Chubb Limited (NYSE:CB) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 12.3% in 2020 through June 30th and surpassed the market by 15.5 percentage points. Unfortunately CB wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); CB investors were disappointed as the stock returned 14.1% during the second quarter 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.