Did Hedge Funds Make The Right Call On Voya Financial Inc (VOYA) ?

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 Voya Financial Inc (NYSE:VOYA) based on that data and determine whether they were really smart about the stock.

Voya Financial Inc (NYSE:VOYA) investors should pay attention to a decrease in support from the world’s most elite money managers of late. VOYA was in 32 hedge funds’ portfolios at the end of March. There were 43 hedge funds in our database with VOYA holdings at the end of the previous quarter. Our calculations also showed that VOYA 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.


Israel Englander of Millennium 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. Now we’re going to take a peek at the latest hedge fund action encompassing Voya Financial Inc (NYSE:VOYA).

What does smart money think about Voya Financial Inc (NYSE:VOYA)?

At Q1’s end, a total of 32 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -26% from the previous quarter. By comparison, 45 hedge funds held shares or bullish call options in VOYA a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Pzena Investment Management was the largest shareholder of Voya Financial Inc (NYSE:VOYA), with a stake worth $222.8 million reported as of the end of September. Trailing Pzena Investment Management was Samlyn Capital, which amassed a stake valued at $172.5 million. Point72 Asset Management, Impax Asset Management, and Millennium 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 Samlyn Capital allocated the biggest weight to Voya Financial Inc (NYSE:VOYA), around 4.35% of its 13F portfolio. Capital Returns Management is also relatively very bullish on the stock, earmarking 4.22 percent of its 13F equity portfolio to VOYA.

Due to the fact that Voya Financial Inc (NYSE:VOYA) has witnessed falling interest from the entirety of the hedge funds we track, logic holds that there is a sect of hedge funds that decided to sell off their positions entirely heading into Q4. Intriguingly, Louis Bacon’s Moore Global Investments cut the largest investment of the “upper crust” of funds watched by Insider Monkey, valued at close to $18.3 million in stock. George McCabe’s fund, Portolan Capital Management, also said goodbye to its stock, about $13.5 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest fell by 11 funds heading into Q4.

Let’s also examine hedge fund activity in other stocks similar to Voya Financial Inc (NYSE:VOYA). These stocks are Ascendis Pharma A/S (NASDAQ:ASND), Douglas Emmett, Inc. (NYSE:DEI), China Southern Airlines Co Ltd (NYSE:ZNH), and James Hardie Industries plc (NYSE:JHX). This group of stocks’ market values are similar to VOYA’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ASND 33 2201133 -5
DEI 22 526330 3
ZNH 2 7964 -1
JHX 4 6976 1
Average 15.25 685601 -0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 15.25 hedge funds with bullish positions and the average amount invested in these stocks was $686 million. That figure was $617 million in VOYA’s case. Ascendis Pharma A/S (NASDAQ:ASND) is the most popular stock in this table. On the other hand China Southern Airlines Co Ltd (NYSE:ZNH) is the least popular one with only 2 bullish hedge fund positions. Voya Financial Inc (NYSE:VOYA) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but 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 but beat the market by 15.5 percentage points. Unfortunately VOYA wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on VOYA were disappointed as the stock returned 15.4% during the same time period 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 many of these stocks already outperformed the market so far this year.

Follow Voya Financial Inc. (NYSE:VOYA)

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