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Hedge Funds Are Selling Safety Insurance Group, Inc. (SAFT)

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. Now, we are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article you are going to find out whether hedge funds thoughtSafety Insurance Group, Inc. (NASDAQ:SAFT) was a good investment heading into the second quarter and how the stock traded in comparison to the top hedge fund picks.

Safety Insurance Group, Inc. (NASDAQ:SAFT) investors should be aware of a decrease in hedge fund sentiment recently. SAFT was in 12 hedge funds’ portfolios at the end of the first quarter of 2020. There were 15 hedge funds in our database with SAFT holdings at the end of the previous quarter. Our calculations also showed that SAFT 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.

At the moment there are several signals stock market investors put to use to appraise publicly traded companies. A duo of the most underrated signals are hedge fund and insider trading indicators. We have shown that, historically, those who follow the best picks of the elite hedge fund managers can outclass the broader indices by a superb margin (see the details here).

Ken Griffin

Ken Griffin of Citadel Investment Group

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. With all of this in mind we’re going to take a glance at the recent hedge fund action encompassing Safety Insurance Group, Inc. (NASDAQ:SAFT).

Hedge fund activity in Safety Insurance Group, Inc. (NASDAQ:SAFT)

At Q1’s end, a total of 12 of the hedge funds tracked by Insider Monkey were long this stock, a change of -20% from the previous quarter. By comparison, 11 hedge funds held shares or bullish call options in SAFT a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Safety Insurance Group, Inc. (NASDAQ:SAFT) was held by Renaissance Technologies, which reported holding $28.7 million worth of stock at the end of September. It was followed by AQR Capital Management with a $4.4 million position. Other investors bullish on the company included Prospector Partners, Citadel Investment Group, and AltraVue Capital. In terms of the portfolio weights assigned to each position AltraVue Capital allocated the biggest weight to Safety Insurance Group, Inc. (NASDAQ:SAFT), around 1.3% of its 13F portfolio. Prospector Partners is also relatively very bullish on the stock, earmarking 0.77 percent of its 13F equity portfolio to SAFT.

Judging by the fact that Safety Insurance Group, Inc. (NASDAQ:SAFT) has faced declining sentiment from the entirety of the hedge funds we track, logic holds that there were a few money managers who were dropping their full holdings in the first quarter. Interestingly, Israel Englander’s Millennium Management dropped the biggest stake of all the hedgies monitored by Insider Monkey, comprising about $0.7 million in stock. Noam Gottesman’s fund, GLG Partners, also cut its stock, about $0.3 million worth. These transactions are important to note, as total hedge fund interest dropped by 3 funds in the first quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Safety Insurance Group, Inc. (NASDAQ:SAFT). We will take a look at Extended Stay America Inc (NASDAQ:STAY), First Majestic Silver Corp (NYSE:AG), Cubic Corporation (NYSE:CUB), and Avanos Medical, Inc. (NYSE:AVNS). This group of stocks’ market values resemble SAFT’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
STAY 18 260865 -17
AG 13 58265 -3
CUB 17 20747 -2
AVNS 16 83135 8
Average 16 105753 -3.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $106 million. That figure was $48 million in SAFT’s case. Extended Stay America Inc (NASDAQ:STAY) is the most popular stock in this table. On the other hand First Majestic Silver Corp (NYSE:AG) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks Safety Insurance Group, Inc. (NASDAQ:SAFT) is even less popular than AG. Hedge funds dodged a bullet by taking a bearish stance towards SAFT. Our calculations showed that the top 10 most popular hedge fund stocks 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 managed to beat the market by 15.5 percentage points. Unfortunately SAFT wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); SAFT investors were disappointed as the stock returned -8.6% 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 so far in 2020.

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