Is Metlife Inc (NYSE:MET) a good equity to bet on right now? We like to check what the smart money thinks first before doing extensive research. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to find the winners in the stock market.
Hedge fund interest in Metlife Inc (NYSE:MET) shares was flat at the end of last quarter. This is usually a negative indicator. 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 Regeneron Pharmaceuticals Inc (NASDAQ:REGN), Relx PLC (NYSE:RELX), and Marsh & McLennan Companies, Inc. (NYSE:MMC) to gather more data points.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
We’re going to view the key hedge fund action encompassing Metlife Inc (NYSE:MET).
How are hedge funds trading Metlife Inc (NYSE:MET)?
At Q4’s end, a total of 24 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in MET over the last 14 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were upping their holdings substantially (or already accumulated large positions).
More specifically, Diamond Hill Capital was the largest shareholder of Metlife Inc (NYSE:MET), with a stake worth $445.2 million reported as of the end of September. Trailing Diamond Hill Capital was Pzena Investment Management, which amassed a stake valued at $346.6 million. AQR Capital Management, GLG Partners, and Masters Capital Management were also very fond of the stock, giving the stock large weights in their portfolios.
Due to the fact that Metlife Inc (NYSE:MET) has witnessed falling interest from the entirety of the hedge funds we track, it’s safe to say that there lies a certain “tier” of hedgies that slashed their full holdings last quarter. Intriguingly, Mike Masters’s Masters Capital Management dropped the largest investment of all the hedgies monitored by Insider Monkey, comprising an estimated $42 million in stock, and Matthew Tewksbury’s Stevens Capital Management was right behind this move, as the fund dropped about $15.9 million worth. These transactions are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s check out hedge fund activity in other stocks similar to Metlife Inc (NYSE:MET). These stocks are Regeneron Pharmaceuticals Inc (NASDAQ:REGN), Relx PLC (NYSE:RELX), Marsh & McLennan Companies, Inc. (NYSE:MMC), and Phillips 66 (NYSE:PSX). All of these stocks’ market caps match MET’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| REGN | 35 | 1142943 | 5 |
| RELX | 5 | 73822 | 0 |
| MMC | 29 | 659019 | 0 |
| PSX | 47 | 2113027 | 4 |
| Average | 29 | 997203 | 2.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 29 hedge funds with bullish positions and the average amount invested in these stocks was $997 million. That figure was $1032 million in MET’s case. Phillips 66 (NYSE:PSX) is the most popular stock in this table. On the other hand Relx PLC (NYSE:RELX) is the least popular one with only 5 bullish hedge fund positions. Metlife Inc (NYSE:MET) is not the least popular stock in this group but hedge fund interest is still below average. More importantly hedge fund interest towards Metlife has been declining in recent years. This is a negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 15 most popular stocks among hedge funds returned 19.7% through March 15th and outperformed the S&P 500 ETF (SPY) by 6.6 percentage points. Unfortunately Metlife wasn’t in this group. Hedge funds that bet on Metlife were disappointed as the stock returned 11.4% and underperformed the market. If you are interested in investing in large cap stocks, you should check out the top 15 hedge fund stocks as 13 of these outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.
