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Hedge Funds Intensely Selling W.R. Berkley Corporation (WRB)

At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards W.R. Berkley Corporation (NYSE:WRB).

Is W.R. Berkley Corporation (NYSE:WRB) going to take off soon? The best stock pickers are taking a bearish view. The number of long hedge fund bets retreated by 8 lately. Our calculations also showed that WRB 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.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 58 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

MILLENNIUM MANAGEMENT

Israel Englander of Millennium Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s view the key hedge fund action surrounding W.R. Berkley Corporation (NYSE:WRB).

How are hedge funds trading W.R. Berkley Corporation (NYSE:WRB)?

At the end of the first quarter, a total of 26 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -24% from the fourth quarter of 2019. On the other hand, there were a total of 18 hedge funds with a bullish position in WRB a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to Insider Monkey’s hedge fund database, Polar Capital, managed by Brian Ashford-Russell and Tim Woolley, holds the largest position in W.R. Berkley Corporation (NYSE:WRB). Polar Capital has a $62 million position in the stock, comprising 0.7% of its 13F portfolio. The second most bullish fund manager is AQR Capital Management, led by Cliff Asness, holding a $49.3 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors that hold long positions consist of Renaissance Technologies, Israel Englander’s Millennium Management and Daniel Johnson’s Gillson Capital. In terms of the portfolio weights assigned to each position Gillson Capital allocated the biggest weight to W.R. Berkley Corporation (NYSE:WRB), around 2.03% of its 13F portfolio. Polar Capital is also relatively very bullish on the stock, designating 0.67 percent of its 13F equity portfolio to WRB.

Judging by the fact that W.R. Berkley Corporation (NYSE:WRB) has faced declining sentiment from the entirety of the hedge funds we track, it’s easy to see that there is a sect of funds that elected to cut their full holdings heading into Q4. It’s worth mentioning that Dmitry Balyasny’s Balyasny Asset Management sold off the largest position of all the hedgies tracked by Insider Monkey, comprising an estimated $21.2 million in stock, and D. E. Shaw’s D E Shaw was right behind this move, as the fund sold off about $3.9 million worth. These transactions are important to note, as aggregate hedge fund interest was cut by 8 funds heading into Q4.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as W.R. Berkley Corporation (NYSE:WRB) but similarly valued. We will take a look at NiSource Inc. (NYSE:NI), DaVita Inc (NYSE:DVA), Masimo Corporation (NASDAQ:MASI), and BeiGene, Ltd. (NASDAQ:BGNE). All of these stocks’ market caps are closest to WRB’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NI 27 641894 -1
DVA 43 3657786 5
MASI 31 156950 1
BGNE 11 2174312 -5
Average 28 1657736 0

View table here if you experience formatting issues.

As you can see these stocks had an average of 28 hedge funds with bullish positions and the average amount invested in these stocks was $1658 million. That figure was $208 million in WRB’s case. DaVita Inc (NYSE:DVA) is the most popular stock in this table. On the other hand BeiGene, Ltd. (NASDAQ:BGNE) is the least popular one with only 11 bullish hedge fund positions. W.R. Berkley Corporation (NYSE:WRB) 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 8.3% in 2020 through the end of May and surpassed the market by 13.2 percentage points. Unfortunately WRB wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); WRB investors were disappointed as the stock returned 11.1% 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.