It was a rough third quarter for many hedge funds, which were naturally unable to overcome the big dip in the broad market, as the S&P 500 fell by about 7% during the quarter. The Russell 2000, composed of smaller companies, performed even worse, trailing the S&P by about 14 percentage points between June 25 and October 30, as investors fled less-known quantities for safe havens. This was the case with hedge funds, who we heard were pulling money from the market amid the volatility, which included money from small-cap stocks, which they invest in at a higher rate than other investors. This action contributed to the greater decline in these stocks during the tumultuous period. We will study how this market volatility affected their sentiment towards Erie Indemnity Company (NASDAQ:ERIE) during the quarter below.
Erie Indemnity Company (NASDAQ:ERIE) investors should pay attention to an increase in enthusiasm from smart money lately. ERIE was in 10 hedge funds’ portfolios at the end of the third quarter of 2015. There were 8 hedge funds in our database with ERIE holdings at the end of the previous quarter. At the end of this article we will also compare ERIE to other stocks including Sociedad Quimica y Minera (ADR) (NYSE:SQM), Bemis Company, Inc. (NYSE:BMS), and Donaldson Company, Inc. (NYSE:DCI) to get a better sense of its popularity.
Follow Erie Indemnity Co (NASDAQ:ERIE)
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According to most traders, hedge funds are perceived as slow, outdated financial tools of yesteryear. While there are over 8000 funds trading at the moment, Our researchers choose to focus on the crème de la crème of this club, approximately 700 funds. These investment experts orchestrate the lion’s share of the smart money’s total capital, and by monitoring their matchless investments, Insider Monkey has determined a number of investment strategies that have historically outstripped the market. Insider Monkey’s small-cap hedge fund strategy outrun the S&P 500 index by 12 percentage points annually for a decade in their back tests.
Now, we’re going to review the latest action surrounding Erie Indemnity Company (NASDAQ:ERIE).
How have hedgies been trading Erie Indemnity Company (NASDAQ:ERIE)?
At Q3’s end, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 25% from the second quarter. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Royce & Associates, managed by Chuck Royce, holds the number one position in Erie Indemnity Company (NASDAQ:ERIE). Royce & Associates has a $37.3 million position in the stock, comprising 0.2% of its 13F portfolio. Coming in second is Renaissance Technologies, managed by Jim Simons, which holds a $5.8 million position; less than 0.1% of its 13F portfolio is allocated to the stock. Some other members of the smart money with similar optimism encompass D E Shaw, Israel Englander’s Millennium Management and Paul J. Isaac’s Arbiter Partners Capital Management.
As one would reasonably expect, key hedge funds were breaking ground themselves. PDT Partners, managed by Peter Muller, initiated the largest position in Erie Indemnity Company (NASDAQ:ERIE). PDT Partners had $0.3 million invested in the company at the end of the quarter. Ray Dalio’s Bridgewater Associates also made a $0.2 million investment in the stock during the quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Erie Indemnity Company (NASDAQ:ERIE) but similarly valued. These stocks are Sociedad Quimica y Minera (ADR) (NYSE:SQM), Bemis Company, Inc. (NYSE:BMS), Donaldson Company, Inc. (NYSE:DCI), and Arris Group, Inc. (NASDAQ:ARRS). This group of stocks’ market values are closest to ERIE’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SQM | 9 | 54299 | -5 |
| BMS | 25 | 198698 | 1 |
| DCI | 22 | 112975 | 7 |
| ARRS | 35 | 1187720 | -6 |
As you can see these stocks had an average of 22.75 hedge funds with bullish positions and the average amount invested in these stocks was $388 million. That figure was $52 million in ERIE’s case. Arris Group, Inc. (NASDAQ:ARRS) is the most popular stock in this table. On the other hand Sociedad Quimica y Minera (ADR) (NYSE:SQM) is the least popular one with only 9 bullish hedge fund positions. Erie Indemnity Company (NASDAQ:ERIE) 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 ARRS might be a better candidate to consider a long position.
