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Hedge Funds Are Betting On Marsh & McLennan Companies, Inc. (MMC)

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 Marsh & McLennan Companies, Inc. (NYSE:MMC) based on that data.

Is Marsh & McLennan Companies, Inc. (NYSE:MMC) an excellent stock to buy now? Money managers are buying. The number of long hedge fund bets increased by 6 recently. Our calculations also showed that MMC 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 51 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.

Phill Gross of Adage Capital Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s take a gander at the latest hedge fund action regarding Marsh & McLennan Companies, Inc. (NYSE:MMC).

Hedge fund activity in Marsh & McLennan Companies, Inc. (NYSE:MMC)

Heading into the second quarter of 2020, a total of 37 of the hedge funds tracked by Insider Monkey were long this stock, a change of 19% from one quarter earlier. On the other hand, there were a total of 29 hedge funds with a bullish position in MMC a year ago. With the smart money’s sentiment swirling, there exists a few key hedge fund managers who were upping their holdings significantly (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Polar Capital, managed by Brian Ashford-Russell and Tim Woolley, holds the number one position in Marsh & McLennan Companies, Inc. (NYSE:MMC). Polar Capital has a $168.4 million position in the stock, comprising 1.8% of its 13F portfolio. Sitting at the No. 2 spot is Diamond Hill Capital, led by Ric Dillon, holding a $138.3 million position; the fund has 0.9% of its 13F portfolio invested in the stock. Remaining professional money managers that are bullish include Tom Gayner’s Markel Gayner Asset Management, Cliff Asness’s AQR Capital Management and Phill Gross and Robert Atchinson’s Adage Capital Management. In terms of the portfolio weights assigned to each position Bishop Rock Capital allocated the biggest weight to Marsh & McLennan Companies, Inc. (NYSE:MMC), around 5.33% of its 13F portfolio. Oribel Capital Management is also relatively very bullish on the stock, dishing out 2.67 percent of its 13F equity portfolio to MMC.

Now, key money managers have jumped into Marsh & McLennan Companies, Inc. (NYSE:MMC) headfirst. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, created the biggest position in Marsh & McLennan Companies, Inc. (NYSE:MMC). Arrowstreet Capital had $19.5 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also made a $14.9 million investment in the stock during the quarter. The following funds were also among the new MMC investors: Mikal Patel’s Oribel Capital Management, Peter Seuss’s Prana Capital Management, and Greg Eisner’s Engineers Gate Manager.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Marsh & McLennan Companies, Inc. (NYSE:MMC) but similarly valued. We will take a look at Deere & Company (NYSE:DE), Global Payments Inc (NYSE:GPN), The Charles Schwab Corporation (NYSE:SCHW), and The Progressive Corporation (NYSE:PGR). All of these stocks’ market caps are similar to MMC’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
DE 44 875005 -6
GPN 67 2154936 3
SCHW 62 2907493 -8
PGR 51 1505680 3
Average 56 1860779 -2

View table here if you experience formatting issues.

As you can see these stocks had an average of 56 hedge funds with bullish positions and the average amount invested in these stocks was $1861 million. That figure was $668 million in MMC’s case. Global Payments Inc (NYSE:GPN) is the most popular stock in this table. On the other hand Deere & Company (NYSE:DE) is the least popular one with only 44 bullish hedge fund positions. Compared to these stocks Marsh & McLennan Companies, Inc. (NYSE:MMC) is even less popular than DE. Hedge funds clearly dropped the ball on MMC as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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 8.3% in 2020 through the end of May and still beat the market by 13.2 percentage points. A small number of hedge funds were also right about betting on MMC as the stock returned 23.1% so far in the second quarter and outperformed the market by an even larger margin.

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