As we already know from media reports and hedge fund investor letters, many hedge funds lost money in fourth quarter, blaming macroeconomic conditions and unpredictable events that hit several sectors, with technology among them. Nevertheless, most investors decided to stick to their bullish theses and their long-term focus allows us to profit from the recent declines. In particular, let’s take a look at what hedge funds think about Employers Holdings, Inc. (NYSE:EIG) in this article.
Is Employers Holdings, Inc. (NYSE:EIG) undervalued? Hedge funds are in a bullish mood. The number of bullish hedge fund bets moved up by 3 in recent months. Our calculations also showed that EIG isn’t among the 30 most popular stocks among hedge funds. EIG was in 18 hedge funds’ portfolios at the end of the fourth quarter of 2018. There were 15 hedge funds in our database with EIG positions at the end of the previous quarter.
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 has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (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 27.5% through March 12, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We’re going to analyze the fresh hedge fund action regarding Employers Holdings, Inc. (NYSE:EIG).
What does the smart money think about Employers Holdings, Inc. (NYSE:EIG)?
Heading into the first quarter of 2019, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of 20% from the previous quarter. By comparison, 17 hedge funds held shares or bullish call options in EIG a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
More specifically, AQR Capital Management was the largest shareholder of Employers Holdings, Inc. (NYSE:EIG), with a stake worth $13.6 million reported as of the end of December. Trailing AQR Capital Management was Renaissance Technologies, which amassed a stake valued at $12.7 million. Millennium Management, Winton Capital Management, and Marshall Wace LLP were also very fond of the stock, giving the stock large weights in their portfolios.
As industrywide interest jumped, key hedge funds have been driving this bullishness. Quantinno Capital, managed by Hoon Kim, initiated the most outsized position in Employers Holdings, Inc. (NYSE:EIG). Quantinno Capital had $0.3 million invested in the company at the end of the quarter. Minhua Zhang’s Weld Capital Management also made a $0.2 million investment in the stock during the quarter. The only other fund with a brand new EIG position is Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital.
Let’s now take a look at hedge fund activity in other stocks similar to Employers Holdings, Inc. (NYSE:EIG). We will take a look at G-III Apparel Group, Ltd. (NASDAQ:GIII), Enanta Pharmaceuticals Inc (NASDAQ:ENTA), Atrion Corporation (NASDAQ:ATRI), and Osisko Gold Royalties Ltd (NYSE:OR). This group of stocks’ market values are closest to EIG’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.5 hedge funds with bullish positions and the average amount invested in these stocks was $103 million. That figure was $77 million in EIG’s case. Enanta Pharmaceuticals Inc (NASDAQ:ENTA) is the most popular stock in this table. On the other hand Atrion Corporation (NASDAQ:ATRI) is the least popular one with only 10 bullish hedge fund positions. Employers Holdings, Inc. (NYSE:EIG) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately EIG wasn’t nearly as popular as these 15 stock and hedge funds that were betting on EIG were disappointed as the stock returned -2.8% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.