Here is What Hedge Funds Think About Selective Insurance Group (SIGI)

Legendary investors such as Leon Cooperman and Seth Klarman earn enormous amounts of money for themselves and their investors by doing in-depth research on small-cap stocks that big brokerage houses don’t publish. Small cap stocks -especially when they are screened well- can generate substantial outperformance versus a boring index fund. That’s why we analyze the activity of those successful funds in these small-cap stocks. In the following paragraphs, we analyze Selective Insurance Group (NASDAQ:SIGI) from the perspective of those successful funds.

Selective Insurance Group (NASDAQ:SIGI) has seen a decrease in enthusiasm from smart money of late. At the end of September, 13 funds from our database held shares of the company, compared to 18 funds a quarter earlier. However, 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 Tootsie Roll Industries, Inc. (NYSE:TR), Knight Transportation (NYSE:KNX), and WP Glimcher Inc (NYSE:WPG) to gather more data points.

We follow over 700 hedge funds and other institutional investors and by analyzing their quarterly 13F filings, we identify stocks that they are collectively bullish on and develop investment strategies based on this data. One strategy that outperformed the market over the last year involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively most bullish on. Over the past year, this strategy generated returns of 18%, topping the 8% gain registered by S&P 500 ETFs. We launched this strategy 2.5 years ago and it returned more than 39% since then, vs. 22% gain registered by the S&P 500 ETFs.

Now, let’s take a peek at the fresh action surrounding Selective Insurance Group (NASDAQ:SIGI).

How have hedgies been trading Selective Insurance Group (NASDAQ:SIGI)?

Heading into the fourth quarter of 2016, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, down by 28% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards SIGI over the last five quarters. With the smart money’s sentiment swirling, there exists a select group of notable hedge fund managers who were upping their holdings considerably (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital has the number one position in Selective Insurance Group (NASDAQ:SIGI), worth close to $7.7 million, corresponding to less than 0.1%% of its total 13F portfolio. The second largest stake is held by Citadel Investment Group, led by Ken Griffin, which holds a $6.7 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other professional money managers that hold long positions include John D. Gillespie’s Prospector Partners, Cliff Asness’ AQR Capital Management, and Robert B. Gillam’s McKinley Capital Management. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

Due to the fact that Selective Insurance Group (NASDAQ:SIGI) has gone through bearish sentiment from the smart money, we can see that there were a few money managers who were dropping their full holdings during the third quarter. Interestingly, Millennium Management, one of the largest hedge funds in the world, cashed in the largest investment of the 700 funds monitored by Insider Monkey, valued at about $2.7 million in stock. John Overdeck and David Siegel’s fund, Two Sigma Advisors, also sold off its stock, about $2.4 million worth.

Let’s now take a look at hedge fund activity in other stocks similar to Selective Insurance Group (NASDAQ:SIGI). These stocks are Tootsie Roll Industries, Inc. (NYSE:TR), Knight Transportation (NYSE:KNX), WP Glimcher Inc (NYSE:WPG), and Armstrong World Industries, Inc. (NYSE:AWI). This group of stocks’ market valuations resemble SIGI’s market valuation.

As you can see these stocks had an average of 16 funds with bullish positions and the average amount invested in these stocks was $369 million, compared to $38 million in SIGI’s case. Armstrong World Industries, Inc. (NYSE:AWI) is the most popular stock in this table. On the other hand Knight Transportation (NYSE:KNX) is the least popular one with only nine funds holding shares. Selective Insurance Group (NASDAQ:SIGI) 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. In this regard Armstrong World Industries, Inc. (NYSE:AWI) might be a better candidate to consider taking a long position in.

Disclosure: none