We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Ackman’s recent Valeant losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards HCC Insurance Holdings, Inc. (NYSE:HCC).
HCC Insurance Holdings, Inc. (NYSE:HCC) has experienced an increase in hedge fund interest of late. 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 Willis Group Holdings PLC (NYSE:WSH), News Corp (NASDAQ:NWSA), and AGL Resources Inc. (NYSE:GAS) to gather more data points.
Today there are a lot of gauges market participants use to analyze stocks. Some of the less utilized gauges are hedge fund and insider trading moves. We have shown that, historically, those who follow the top picks of the elite money managers can beat the market by a solid amount (see the details here).
With all of this in mind, we’re going to take a glance at the key action regarding HCC Insurance Holdings, Inc. (NYSE:HCC).
What have hedge funds been doing with HCC Insurance Holdings, Inc. (NYSE:HCC)?
At Q3’s end, a total of 30 of the hedge funds tracked by Insider Monkey were long this stock, an increase of 7% from the second quarter. With hedge funds’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Robert Emil Zoellner’s Alpine Associates has the biggest position in HCC Insurance Holdings, Inc. (NYSE:HCC), worth close to $155.3 million, amounting to 6.1% of its total 13F portfolio. Coming in second is Clint Carlson of Carlson Capital, with an $119.8 million position; 1.4% of its 13F portfolio is allocated to the stock. Other peers with similar optimism consist of Alec Litowitz and Ross Laser’s Magnetar Capital, Phill Gross and Robert Atchinson’s Adage Capital Management and Paul Glazer’s Glazer Capital.
With a general bullishness amongst the heavyweights, key hedge funds have been driving this bullishness. Alyeska Investment Group, managed by Anand Parekh, assembled the biggest position in HCC Insurance Holdings, Inc. (NYSE:HCC). According to its latest 13F filing, the fund had $34.2 million invested in the company at the end of the quarter. Shane Finemore’s Manikay Partners also initiated an $31 million position during the quarter. The following funds were also among the new HCC investors: David Costen Haley’s HBK Investments, John Bader’s Halcyon Asset Management, and Matthew Tewksbury’s Stevens Capital Management.
Let’s now take a look at hedge fund activity in other stocks similar to HCC Insurance Holdings, Inc. (NYSE:HCC). We will take a look at Willis Group Holdings PLC (NYSE:WSH), News Corp (NASDAQ:NWSA), AGL Resources Inc. (NYSE:GAS), and Gildan Activewear Inc (USA) (NYSE:GIL). All of these stocks’ market caps resemble HCC’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 28 hedge funds with bullish positions and the average amount invested in these stocks was $1.05 billion. In the case of HCC, that figure was $733 million. News Corp (NASDAQ:NWSA) is the most popular stock in this table, while Gildan Activewear Inc (USA) (NYSE:GIL) is the laggard with only 19 bullish hedge fund positions. HCC Insurance Holdings, Inc. (NYSE:HCC) 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 NWSA might be a better candidate to consider a long position.