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Hedge Funds Standing By Sun Life Financial Inc. (SLF)

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Sun Life Financial Inc. (NYSE:SLF) based on that data.

Sun Life Financial Inc. (NYSE:SLF) shares haven’t seen a lot of action during the first quarter. Overall, hedge fund sentiment was unchanged. The stock was in 16 hedge funds’ portfolios at the end of March. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Franco-Nevada Corporation (NYSE:FNV), Welltower Inc. (NYSE:WELL), and TD Ameritrade Holding Corp. (NASDAQ:AMTD) to gather more data points. Our calculations also showed that SLF 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.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Blair Levinsky of Waratah Capital Advisors

Blair Levinsky of Waratah Capital Advisors

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, We take a look at lists like the 10 stocks that went up during the 2008 crash to identify the companies that are likely to deliver double digit returns in up and down markets. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. 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 let’s take a peek at the latest hedge fund action encompassing Sun Life Financial Inc. (NYSE:SLF).

How have hedgies been trading Sun Life Financial Inc. (NYSE:SLF)?

Heading into the second quarter of 2020, a total of 16 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in SLF over the last 18 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).

More specifically, Citadel Investment Group was the largest shareholder of Sun Life Financial Inc. (NYSE:SLF), with a stake worth $60.4 million reported as of the end of September. Trailing Citadel Investment Group was Renaissance Technologies, which amassed a stake valued at $22.8 million. Bridgewater Associates, GLG Partners, and PEAK6 Capital Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Unio Capital allocated the biggest weight to Sun Life Financial Inc. (NYSE:SLF), around 0.22% of its 13F portfolio. Waratah Capital Advisors is also relatively very bullish on the stock, setting aside 0.16 percent of its 13F equity portfolio to SLF.

Judging by the fact that Sun Life Financial Inc. (NYSE:SLF) has witnessed a decline in interest from hedge fund managers, it’s safe to say that there were a few money managers that elected to cut their entire stakes last quarter. It’s worth mentioning that Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital said goodbye to the largest stake of the “upper crust” of funds tracked by Insider Monkey, comprising close to $26.1 million in stock, and Benjamin A. Smith’s Laurion Capital Management was right behind this move, as the fund dropped about $1 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Sun Life Financial Inc. (NYSE:SLF) but similarly valued. We will take a look at Franco-Nevada Corporation (NYSE:FNV), Welltower Inc. (NYSE:WELL), TD Ameritrade Holding Corp. (NASDAQ:AMTD), and Entergy Corporation (NYSE:ETR). This group of stocks’ market values resemble SLF’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
FNV 21 896434 -3
WELL 25 313164 1
AMTD 46 1250217 -4
ETR 34 1036847 3
Average 31.5 874166 -0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 31.5 hedge funds with bullish positions and the average amount invested in these stocks was $874 million. That figure was $103 million in SLF’s case. TD Ameritrade Holding Corp. (NASDAQ:AMTD) is the most popular stock in this table. On the other hand Franco-Nevada Corporation (NYSE:FNV) is the least popular one with only 21 bullish hedge fund positions. Compared to these stocks Sun Life Financial Inc. (NYSE:SLF) is even less popular than FNV. Hedge funds dodged a bullet by taking a bearish stance towards SLF. 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 13.3% in 2020 through June 25th but managed to beat the market by 16.8 percentage points. Unfortunately SLF wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); SLF investors were disappointed as the stock returned 14.7% during the second quarter (through June 25th) 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.