Out of thousands of stocks that are currently traded on the market, it is difficult to determine those that can really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of over 700 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Humana Inc (NYSE:HUM).
Humana Inc (NYSE:HUM) investors should be aware of an increase in hedge fund sentiment of late. HUM was in 44 hedge funds’ portfolios at the end of the third quarter of 2018. There were 41 hedge funds in our database with HUM positions at the end of the previous quarter. Our calculations also showed that HUM isn’t among the 30 most popular stocks among hedge funds.
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 has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (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 24% through December 3, 2018. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let’s view the fresh hedge fund action regarding Humana Inc (NYSE:HUM).
Hedge fund activity in Humana Inc (NYSE:HUM)
Heading into the fourth quarter of 2018, a total of 44 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 7% from the second quarter of 2018. The graph below displays the number of hedge funds with bullish position in HUM over the last 13 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Jim Simons’s Renaissance Technologies has the biggest position in Humana Inc (NYSE:HUM), worth close to $1.0747 billion, amounting to 1.1% of its total 13F portfolio. The second largest stake is held by AQR Capital Management, managed by Cliff Asness, which holds a $958.8 million position; the fund has 1% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors with similar optimism encompass Noam Gottesman’s GLG Partners, John Overdeck and David Siegel’s Two Sigma Advisors and Samuel Isaly’s OrbiMed Advisors.
As industrywide interest jumped, some big names have jumped into Humana Inc (NYSE:HUM) headfirst. Stevens Capital Management, managed by Matthew Tewksbury, initiated the most outsized position in Humana Inc (NYSE:HUM). Stevens Capital Management had $12.7 million invested in the company at the end of the quarter. Ian Simm’s Impax Asset Management also initiated a $12.6 million position during the quarter. The other funds with new positions in the stock are Brandon Haley’s Holocene Advisors, John Brandmeyer’s Cognios Capital, and Mike Vranos’s Ellington.
Let’s go over hedge fund activity in other stocks similar to Humana Inc (NYSE:HUM). We will take a look at Metlife Inc (NYSE:MET), Target Corporation (NYSE:TGT), Praxair, Inc. (NYSE:PX), and Carnival plc (NYSE:CUK). This group of stocks’ market values are similar to HUM’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MET | 24 | 1157827 | -2 |
| TGT | 42 | 1971217 | 8 |
| PX | 41 | 1693450 | -4 |
| CUK | 8 | 57045 | 0 |
| Average | 28.75 | 1219885 | 0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 28.75 hedge funds with bullish positions and the average amount invested in these stocks was $1.22 billion. That figure was $3.21 billion in HUM’s case. Target Corporation (NYSE:TGT) is the most popular stock in this table. On the other hand Carnival plc (NYSE:CUK) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Humana Inc (NYSE:HUM) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
Disclosure: None. This article was originally published at Insider Monkey.
