Hedge Funds Don’t Like W.R. Berkley Corporation (WRB) At All

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 823 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 June 30th, when the S&P 500 Index was trading around the 3100 level. Since the end of March, investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned more than 50% since its bottom. In this article you are going to find out whether hedge funds thought W.R. Berkley Corporation (NYSE:WRB) was a good investment heading into the third quarter and how the stock traded in comparison to the top hedge fund picks.

W.R. Berkley Corporation (NYSE:WRB) was in 27 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 34. WRB shareholders have witnessed an increase in activity from the world’s largest hedge funds of late. There were 26 hedge funds in our database with WRB positions at the end of the first quarter. Our calculations also showed that WRB isn’t among the 30 most popular stocks among hedge funds (click for Q2 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.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 56 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. With all of this in mind we’re going to review the new hedge fund action regarding W.R. Berkley Corporation (NYSE:WRB).

What does smart money think about W.R. Berkley Corporation (NYSE:WRB)?

At second quarter’s end, a total of 27 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 4% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards WRB over the last 20 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, Ken Griffin’s Citadel Investment Group has the biggest position in W.R. Berkley Corporation (NYSE:WRB), worth close to $90.2 million, comprising less than 0.1%% of its total 13F portfolio. Sitting at the No. 2 spot is Polar Capital, managed by Brian Ashford-Russell and Tim Woolley, which holds a $65.9 million position; the fund has 0.6% of its 13F portfolio invested in the stock. Other members of the smart money that are bullish encompass Israel Englander’s Millennium Management, Steve Cohen’s Point72 Asset Management and Cliff Asness’s AQR Capital Management. In terms of the portfolio weights assigned to each position Polar Capital allocated the biggest weight to W.R. Berkley Corporation (NYSE:WRB), around 0.57% of its 13F portfolio. Point72 Asset Management is also relatively very bullish on the stock, setting aside 0.32 percent of its 13F equity portfolio to WRB.

As industrywide interest jumped, specific money managers have been driving this bullishness. Point72 Asset Management, managed by Steve Cohen, initiated the most valuable position in W.R. Berkley Corporation (NYSE:WRB). Point72 Asset Management had $48.5 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also made a $15.7 million investment in the stock during the quarter. The following funds were also among the new WRB investors: D. E. Shaw’s D E Shaw, Donald Sussman’s Paloma Partners, and Parvinder Thiara’s Athanor Capital.

Let’s now take a look at hedge fund activity in other stocks similar to W.R. Berkley Corporation (NYSE:WRB). These stocks are Celanese Corporation (NYSE:CE), Discovery Inc. (NASDAQ:DISCA), Concho Resources Inc. (NYSE:CXO), Lyft, Inc. (NASDAQ:LYFT), Zendesk Inc (NYSE:ZEN), Bio-Techne Corporation (NASDAQ:TECH), and United Airlines Holdings Inc (NASDAQ:UAL). This group of stocks’ market values resemble WRB’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 37.7 hedge funds with bullish positions and the average amount invested in these stocks was $719 million. That figure was $350 million in WRB’s case. Zendesk Inc (NYSE:ZEN) is the most popular stock in this table. On the other hand Bio-Techne Corporation (NASDAQ:TECH) is the least popular one with only 27 bullish hedge fund positions. Compared to these stocks W.R. Berkley Corporation (NYSE:WRB) is even less popular than TECH. Our overall hedge fund sentiment score for WRB is 29.8. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Hedge funds dodged a bullet by taking a bearish stance towards WRB. 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 21.3% in 2020 through September 25th but managed to beat the market by 17.7 percentage points. Unfortunately WRB wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); WRB investors were disappointed as the stock returned 5.9% since the end of Q2 (through 9/25) 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.

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