Is RenaissanceRe Holdings Ltd. (NYSE:RNR) the right pick for your portfolio? The best stock pickers are turning less bullish. The number of bullish hedge fund bets were cut by 8 recently.
If you’d ask most traders, hedge funds are perceived as underperforming, old financial tools of the past. While there are greater than 8000 funds trading at the moment, we at Insider Monkey choose to focus on the leaders of this club, around 450 funds. It is estimated that this group oversees the lion’s share of the smart money’s total capital, and by keeping an eye on their highest performing equity investments, we have found a few investment strategies that have historically outpaced the market. Our small-cap hedge fund strategy outperformed the S&P 500 index by 18 percentage points annually for a decade in our back tests, and since we’ve began to sharing our picks with our subscribers at the end of August 2012, we have outperformed the S&P 500 index by 25 percentage points in 6.5 month (check out a sample of our picks).
Just as important, bullish insider trading sentiment is a second way to break down the stock market universe. Obviously, there are plenty of reasons for a corporate insider to drop shares of his or her company, but just one, very clear reason why they would behave bullishly. Many academic studies have demonstrated the market-beating potential of this tactic if investors know what to do (learn more here).
With all of this in mind, we’re going to take a look at the key action surrounding RenaissanceRe Holdings Ltd. (NYSE:RNR).
How have hedgies been trading RenaissanceRe Holdings Ltd. (NYSE:RNR)?
At the end of the fourth quarter, a total of 11 of the hedge funds we track were bullish in this stock, a change of -42% from the previous quarter. With the smart money’s sentiment swirling, there exists a few key hedge fund managers who were upping their stakes considerably.
When looking at the hedgies we track, William B. Gray’s Orbis Investment Management had the biggest position in RenaissanceRe Holdings Ltd. (NYSE:RNR), worth close to $96 million, comprising 1% of its total 13F portfolio. Coming in second is Citadel Investment Group, managed by Ken Griffin, which held a $77 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Remaining hedgies that are bullish include Robert Pitts’s Steadfast Capital Management, Israel Englander’s Millennium Management and Brian Ashford-Russell and Tim Woolley’s Polar Capital.
Since RenaissanceRe Holdings Ltd. (NYSE:RNR) has witnessed bearish sentiment from the smart money, we can see that there was a specific group of fund managers that slashed their full holdings in Q4. Intriguingly, Chase Coleman and Feroz Dewan’s Tiger Global Management LLC dropped the largest position of the “upper crust” of funds we track, valued at an estimated $23 million in stock.. Jim Simons’s fund, Renaissance Technologies, also said goodbye to its stock, about $20 million worth. These transactions are important to note, as aggregate hedge fund interest was cut by 8 funds in Q4.
Insider trading activity in RenaissanceRe Holdings Ltd. (NYSE:RNR)
Insider purchases made by high-level executives is particularly usable when the company in focus has seen transactions within the past half-year. Over the last half-year time frame, RenaissanceRe Holdings Ltd. (NYSE:RNR) has seen zero unique insiders buying, and 10 insider sales (see the details of insider trades here).
Let’s also review hedge fund and insider activity in other stocks similar to RenaissanceRe Holdings Ltd. (NYSE:RNR). These stocks are Validus Holdings, Ltd. (NYSE:VR), American Financial Group (NYSE:AFG), HCC Insurance Holdings, Inc. (NYSE:HCC), White Mountains Insurance Group Ltd (NYSE:WTM), and Markel Corporation (NYSE:MKL). This group of stocks belong to the property & casualty insurance industry and their market caps are closest to RNR’s market cap.
|Company Name||# of Hedge Funds||# of Insiders Buying||# of Insiders Selling|
|Validus Holdings, Ltd. (NYSE:VR)||19||2||1|
|American Financial Group (NYSE:AFG)||10||0||10|
|HCC Insurance Holdings, Inc. (NYSE:HCC)||12||0||4|
|White Mountains Insurance Group Ltd (NYSE:WTM)||11||1||1|
|Markel Corporation (NYSE:MKL)||18||3||1|
With the returns shown by the aforementioned strategies, retail investors should always keep an eye on hedge fund and insider trading activity, and RenaissanceRe Holdings Ltd. (NYSE:RNR) is an important part of this process.
Insider Monkey’s small-cap strategy returned 37% between September 2012 and March 2013 versus 12.9% for the S&P 500 index. Try it now by clicking the link above.