Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in ACE Limited (NYSE:ACE)? The smart money sentiment can provide an answer to this question.
ACE Limited investors should be aware of an increase in activity from the world’s largest hedge funds recently. 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 Luxottica Group SpA (ADR) (NYSE:LUX), VMware, Inc. (NYSE:VMW), and Raytheon Company (NYSE:RTN) to gather more data points.
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In the eyes of most traders, hedge funds are perceived as worthless, outdated investment vehicles of years past. While there are greater than 8000 funds trading today, We choose to focus on the crème de la crème of this club, around 700 funds. These money managers have their hands on most of the smart money’s total capital, and by following their finest picks, Insider Monkey has brought to light numerous investment strategies that have historically outpaced the market. Insider Monkey’s small-cap hedge fund strategy defeated the S&P 500 index by 12 percentage points a year for a decade in their back tests.
With all of this in mind, let’s view the fresh action regarding ACE Limited (NYSE:ACE).
What have hedge funds been doing with ACE Limited (NYSE:ACE)?
At the Q3’s end, a total of 37 of the hedge funds tracked by Insider Monkey were long this stock, a change of 16% from the previous quarter. With hedgies’ sentiment swirling, there exists a few key hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, John A. Levin’s Levin Capital Strategies has the number one position in ACE Limited (NYSE:ACE), worth close to $160.1 million, accounting for 2.7% of its total 13F portfolio. Coming in second is Citadel Investment Group, led by Ken Griffin, holding a $158.2 million position; 0.2% of its 13F portfolio is allocated to the stock. Other members of the smart money that hold long positions comprise Andreas Halvorsen’s Viking Global and David Harding’s Winton Capital Management.
Consequently, key hedge funds were breaking ground themselves. Viking Global initiated the largest position in ACE Limited (NYSE:ACE). Viking Global had $118 million invested in the company at the end of the quarter. Rob Citrone’s Discovery Capital Management also initiated a $100.3 million position during the quarter. The other funds with new positions in the stock are Joe DiMenna’s ZWEIG DIMENNA PARTNERS, Steve Cohen’s Point72 Asset Management, and Ron Bobman’s Capital Returns Management.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as ACE Limited (NYSE:ACE) but similarly valued. These stocks are Luxottica Group SpA (ADR) (NYSE:LUX), VMware, Inc. (NYSE:VMW), Raytheon Company (NYSE:RTN), and Twenty-First Century Fox Inc (NASDAQ:FOXA). This group of stocks’ market values are similar to ACE’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| LUX | 5 | 65293 | 0 |
| VMW | 35 | 959833 | 0 |
| RTN | 31 | 839028 | -6 |
| FOXA | 56 | 4044012 | -1 |
As you can see these stocks had an average of 32 hedge funds with bullish positions and the average amount invested in these stocks was $1.48 billion. That figure was $1.27 billion in ACE’s case. Twenty-First Century Fox Inc (NASDAQ:FOXA) is the most popular stock in this table, while Luxottica Group SpA (ADR) (NYSE:LUX) is the least popular one with only 5 bullish hedge fund positions. ACE Limited (NYSE:ACE) 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. In this regard FOXA might be a better candidate to consider a long position.
