Like everyone else, elite investors make mistakes. Some of their top consensus picks, such as Amazon, Facebook and Alibaba, have not done well in Q4 due to various reasons. Nevertheless, the data show elite investors’ consensus picks have done well on average over the long-term. The top 20 stocks among hedge funds beat the S&P 500 Index ETF by more than 6 percentage points so far this year. Because their consensus picks have done well, we pay attention to what elite funds think before doing extensive research on a stock. In this article, we take a closer look at White Mountains Insurance Group Ltd (NYSE:WTM) from the perspective of those elite funds.
Is White Mountains Insurance Group Ltd (NYSE:WTM) the right pick for your portfolio? Hedge funds are reducing their bets on the stock. The number of bullish hedge fund positions went down by 2 recently. Our calculations also showed that wtm isn’t among the 30 most popular stocks among hedge funds. WTM was in 16 hedge funds’ portfolios at the end of the first quarter of 2019. There were 18 hedge funds in our database with WTM positions at the end of the previous quarter.
Why do we pay any attention at all to hedge fund sentiment? 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 40 percentage points since May 2014 through May 30, 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 30.9% through May 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Noam Gottesman, GLG Partners
We’re going to analyze the latest hedge fund action surrounding White Mountains Insurance Group Ltd (NYSE:WTM).
Hedge fund activity in White Mountains Insurance Group Ltd (NYSE:WTM)
At Q1’s end, a total of 16 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -11% from the previous quarter. By comparison, 15 hedge funds held shares or bullish call options in WTM a year ago. With hedge funds’ capital changing hands, there exists a few noteworthy hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).
Among these funds, Wallace Capital Management held the most valuable stake in White Mountains Insurance Group Ltd (NYSE:WTM), which was worth $75.3 million at the end of the first quarter. On the second spot was Elkhorn Partners which amassed $24.8 million worth of shares. Moreover, Impax Asset Management, Renaissance Technologies, and GLG Partners were also bullish on White Mountains Insurance Group Ltd (NYSE:WTM), allocating a large percentage of their portfolios to this stock.
Because White Mountains Insurance Group Ltd (NYSE:WTM) has witnessed a decline in interest from the aggregate hedge fund industry, it’s safe to say that there were a few money managers that elected to cut their positions entirely heading into Q3. Intriguingly, Paul Marshall and Ian Wace’s Marshall Wace LLP said goodbye to the largest position of the 700 funds monitored by Insider Monkey, valued at about $0.9 million in stock. Hoon Kim’s fund, Quantinno Capital, also cut its stock, about $0.4 million worth. These bearish behaviors are interesting, as total hedge fund interest dropped by 2 funds heading into Q3.
Let’s go over hedge fund activity in other stocks similar to White Mountains Insurance Group Ltd (NYSE:WTM). These stocks are Rogers Corporation (NYSE:ROG), AVX Corporation (NYSE:AVX), Conduent Incorporated (NYSE:CNDT), and Clearway Energy, Inc. (NYSE:CWEN). This group of stocks’ market values match WTM’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ROG | 9 | 67070 | 2 |
| AVX | 11 | 107908 | -5 |
| CNDT | 30 | 579659 | -5 |
| CWEN | 27 | 155158 | 15 |
| Average | 19.25 | 227449 | 1.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.25 hedge funds with bullish positions and the average amount invested in these stocks was $227 million. That figure was $161 million in WTM’s case. Conduent Incorporated (NYSE:CNDT) is the most popular stock in this table. On the other hand Rogers Corporation (NYSE:ROG) is the least popular one with only 9 bullish hedge fund positions. White Mountains Insurance Group Ltd (NYSE:WTM) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. A small number of hedge funds were also right about betting on WTM as the stock returned 10.1% during the same time frame and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
