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Did Hedge Funds Make The Right Call On Manulife Financial Corporation (MFC) ?

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. Now, we are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article you are going to find out whether hedge funds thoughtManulife Financial Corporation (NYSE:MFC) was a good investment heading into the second quarter and how the stock traded in comparison to the top hedge fund picks.

Manulife Financial Corporation (NYSE:MFC) was in 20 hedge funds’ portfolios at the end of the first quarter of 2020. MFC has experienced an increase in support from the world’s most elite money managers in recent months. There were 19 hedge funds in our database with MFC positions at the end of the previous quarter. Our calculations also showed that MFC 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.

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 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.

GOTHAM ASSET MANAGEMENT

Joel Greenblatt of Gotham Asset Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. 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 under-the-radar lithium stock. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. With all of this in mind let’s view the new hedge fund action regarding Manulife Financial Corporation (NYSE:MFC).

What does smart money think about Manulife Financial Corporation (NYSE:MFC)?

At Q1’s end, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a change of 5% from the fourth quarter of 2019. On the other hand, there were a total of 16 hedge funds with a bullish position in MFC a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were upping their stakes considerably (or already accumulated large positions).

Is MFC A Good Stock To Buy?

Among these funds, Renaissance Technologies held the most valuable stake in Manulife Financial Corporation (NYSE:MFC), which was worth $54.3 million at the end of the third quarter. On the second spot was Heathbridge Capital Management which amassed $28.2 million worth of shares. Galibier Capital Management, Bridgewater Associates, and Balyasny Asset 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 Galibier Capital Management allocated the biggest weight to Manulife Financial Corporation (NYSE:MFC), around 10.98% of its 13F portfolio. Heathbridge Capital Management is also relatively very bullish on the stock, designating 7.56 percent of its 13F equity portfolio to MFC.

Consequently, specific money managers have jumped into Manulife Financial Corporation (NYSE:MFC) headfirst. Millennium Management, managed by Israel Englander, assembled the most valuable position in Manulife Financial Corporation (NYSE:MFC). Millennium Management had $2.3 million invested in the company at the end of the quarter. Matthew Hulsizer’s PEAK6 Capital Management also initiated a $1.6 million position during the quarter. The other funds with brand new MFC positions are Joel Greenblatt’s Gotham Asset Management, Paul Marshall and Ian Wace’s Marshall Wace LLP, and D. E. Shaw’s D E Shaw.

Let’s now take a look at hedge fund activity in other stocks similar to Manulife Financial Corporation (NYSE:MFC). We will take a look at Marriott International Inc (NYSE:MAR), Mercadolibre Inc (NASDAQ:MELI), Suncor Energy Inc. (NYSE:SU), and Republic Services, Inc. (NYSE:RSG). All of these stocks’ market caps are similar to MFC’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MAR 47 1553974 10
MELI 60 2099088 8
SU 30 766498 -9
RSG 32 709358 6
Average 42.25 1282230 3.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 42.25 hedge funds with bullish positions and the average amount invested in these stocks was $1282 million. That figure was $139 million in MFC’s case. Mercadolibre Inc (NASDAQ:MELI) is the most popular stock in this table. On the other hand Suncor Energy Inc. (NYSE:SU) is the least popular one with only 30 bullish hedge fund positions. Compared to these stocks Manulife Financial Corporation (NYSE:MFC) is even less popular than SU. Hedge funds dodged a bullet by taking a bearish stance towards MFC. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 18.6% in 2020 through July 27th but managed to beat the market by 17.1 percentage points. Unfortunately MFC wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); MFC investors were disappointed as the stock returned 16.3% since Q1 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 so far in 2020.

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