Hedge Funds Are Dumping Selective Insurance Group (SIGI)

The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on March 31st, about a week after the S&P 500 Index bottomed. We at Insider Monkey have made an extensive database of more than 821 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded Selective Insurance Group (NASDAQ:SIGI) based on those filings.

Is Selective Insurance Group (NASDAQ:SIGI) going to take off soon? Money managers are selling. The number of bullish hedge fund bets were trimmed by 10 recently. Our calculations also showed that SIGI 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). SIGI was in 15 hedge funds’ portfolios at the end of March. There were 25 hedge funds in our database with SIGI positions at the end of the previous quarter.

Video: Watch our video about the top 5 most popular hedge fund stocks.

In the 21st century investor’s toolkit there are many indicators shareholders have at their disposal to analyze publicly traded companies. A pair of the most innovative indicators are hedge fund and insider trading activity. Our experts have shown that, historically, those who follow the top picks of the best money managers can outpace the market by a superb margin (see the details here).

David E. Shaw of D.E. Shaw

David E. Shaw of D.E. Shaw

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, we take a look at lists like the 10 PayPal alternatives for international payments to identify emerging companies that are likely to deliver 1000% gains in the coming years. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. 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 let’s go over the new hedge fund action encompassing Selective Insurance Group (NASDAQ:SIGI).

How are hedge funds trading Selective Insurance Group (NASDAQ:SIGI)?

At the end of the first quarter, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -40% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards SIGI over the last 18 quarters. With hedgies’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).

Is SIGI A Good Stock To Buy?

Among these funds, Citadel Investment Group held the most valuable stake in Selective Insurance Group (NASDAQ:SIGI), which was worth $16.6 million at the end of the third quarter. On the second spot was Prospector Partners which amassed $10.9 million worth of shares. D E Shaw, Marshall Wace LLP, and Renaissance Technologies 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 Prospector Partners allocated the biggest weight to Selective Insurance Group (NASDAQ:SIGI), around 2.05% of its 13F portfolio. Winton Capital Management is also relatively very bullish on the stock, earmarking 0.1 percent of its 13F equity portfolio to SIGI.

Due to the fact that Selective Insurance Group (NASDAQ:SIGI) has faced falling interest from hedge fund managers, it’s safe to say that there were a few money managers who sold off their full holdings last quarter. At the top of the heap, Dmitry Balyasny’s Balyasny Asset Management cut the biggest investment of the 750 funds tracked by Insider Monkey, comprising about $17.1 million in stock, and Noam Gottesman’s GLG Partners was right behind this move, as the fund dumped about $1.3 million worth. These transactions are interesting, as total hedge fund interest dropped by 10 funds last quarter.

Let’s go over hedge fund activity in other stocks similar to Selective Insurance Group (NASDAQ:SIGI). These stocks are BlackLine, Inc. (NASDAQ:BL), Texas Pacific Land Trust (NYSE:TPL), Wyndham Hotels & Resorts, Inc. (NYSE:WH), and Valley National Bancorp (NYSE:VLY). This group of stocks’ market valuations are similar to SIGI’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BL 18 175505 1
TPL 14 694383 -3
WH 31 501047 -13
VLY 22 24789 -2
Average 21.25 348931 -4.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.25 hedge funds with bullish positions and the average amount invested in these stocks was $349 million. That figure was $71 million in SIGI’s case. Wyndham Hotels & Resorts, Inc. (NYSE:WH) is the most popular stock in this table. On the other hand Texas Pacific Land Trust (NYSE:TPL) is the least popular one with only 14 bullish hedge fund positions. Selective Insurance Group (NASDAQ:SIGI) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and 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 13.3% in 2020 through June 25th and surpassed the market by 16.8 percentage points. Unfortunately SIGI wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); SIGI investors were disappointed as the stock returned 4.5% during the second quarter 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 in 2020.

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