Did Hedge Funds Make The Right Call On Metlife Inc (MET) ?

How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Metlife Inc (NYSE:MET) and determine whether hedge funds had an edge regarding this stock.

Metlife Inc (NYSE:MET) shareholders have witnessed a decrease in hedge fund interest lately. MET was in 34 hedge funds’ portfolios at the end of March. There were 38 hedge funds in our database with MET holdings at the end of the previous quarter. Our calculations also showed that MET 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.

To most stock holders, hedge funds are assumed to be underperforming, old investment tools of the past. While there are more than 8000 funds with their doors open today, Our researchers hone in on the leaders of this group, around 850 funds. These hedge fund managers oversee bulk of all hedge funds’ total capital, and by paying attention to their first-class stock picks, Insider Monkey has revealed numerous investment strategies that have historically beaten the broader indices. Insider Monkey’s flagship short hedge fund strategy outpaced the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

George Soros of Soros Fund Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to take a peek at the recent hedge fund action regarding Metlife Inc (NYSE:MET).

What have hedge funds been doing with Metlife Inc (NYSE:MET)?

At Q1’s end, a total of 34 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -11% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards MET over the last 18 quarters. With hedgies’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).

Is MET A Good Stock To Buy?

When looking at the institutional investors followed by Insider Monkey, Ric Dillon’s Diamond Hill Capital has the most valuable position in Metlife Inc (NYSE:MET), worth close to $305.4 million, comprising 2.1% of its total 13F portfolio. The second largest stake is held by Richard S. Pzena of Pzena Investment Management, with a $190.4 million position; 1.4% of its 13F portfolio is allocated to the stock. Other members of the smart money with similar optimism comprise Cliff Asness’s AQR Capital Management, Ken Griffin’s Citadel Investment Group and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital. In terms of the portfolio weights assigned to each position Diamond Hill Capital allocated the biggest weight to Metlife Inc (NYSE:MET), around 2.07% of its 13F portfolio. Redwood Capital Management is also relatively very bullish on the stock, earmarking 1.54 percent of its 13F equity portfolio to MET.

Because Metlife Inc (NYSE:MET) has experienced falling interest from hedge fund managers, logic holds that there exists a select few fund managers who sold off their full holdings last quarter. It’s worth mentioning that Andreas Halvorsen’s Viking Global sold off the biggest investment of all the hedgies followed by Insider Monkey, totaling about $342.7 million in stock, and Dmitry Balyasny’s Balyasny Asset Management was right behind this move, as the fund sold off about $72.5 million worth. These moves are interesting, as total hedge fund interest was cut by 4 funds last quarter.

Let’s check out hedge fund activity in other stocks similar to Metlife Inc (NYSE:MET). We will take a look at WEC Energy Group, Inc. (NYSE:WEC), The Hershey Company (NYSE:HSY), Chunghwa Telecom Co., Ltd (NYSE:CHT), and ICICI Bank Limited (NYSE:IBN). This group of stocks’ market values resemble MET’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
WEC 29 267388 14
HSY 33 958331 -6
CHT 6 123577 2
IBN 24 378931 -5
Average 23 432057 1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 23 hedge funds with bullish positions and the average amount invested in these stocks was $432 million. That figure was $1018 million in MET’s case. The Hershey Company (NYSE:HSY) is the most popular stock in this table. On the other hand Chunghwa Telecom Co., Ltd (NYSE:CHT) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Metlife Inc (NYSE:MET) is more popular among hedge funds. 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 but still managed to beat the market by 15.5 percentage points. Hedge funds were also right about betting on MET, though not to the same extent, as the stock returned 21.2% in Q2 and outperformed the market as well.

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