Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 817 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Manulife Financial Corporation (NYSE:MFC).
Is MFC a good stock to buy now? Investors who are in the know were getting more optimistic. The number of bullish hedge fund bets went up by 2 in recent months. Manulife Financial Corporation (NYSE:MFC) was in 21 hedge funds’ portfolios at the end of September. The all time high for this statistic is 21. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that MFC isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). There were 19 hedge funds in our database with MFC positions at the end of the second quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 S&P 500 ETFs by more than 66 percentage points since March 2017 (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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind let’s analyze the latest hedge fund action surrounding Manulife Financial Corporation (NYSE:MFC).
Do Hedge Funds Think MFC Is A Good Stock To Buy Now?
At Q3’s end, a total of 21 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 11% from the previous quarter. The graph below displays the number of hedge funds with bullish position in MFC over the last 21 quarters. With hedge funds’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).
The largest stake in Manulife Financial Corporation (NYSE:MFC) was held by GLG Partners, which reported holding $57.2 million worth of stock at the end of September. It was followed by Galibier Capital Management with a $40.7 million position. Other investors bullish on the company included Heathbridge Capital Management, Renaissance Technologies, and D E Shaw. In terms of the portfolio weights assigned to each position Heathbridge Capital Management allocated the biggest weight to Manulife Financial Corporation (NYSE:MFC), around 10.28% of its 13F portfolio. Galibier Capital Management is also relatively very bullish on the stock, setting aside 9.56 percent of its 13F equity portfolio to MFC.
Now, some big names were leading the bulls’ herd. Cinctive Capital Management, managed by Richard SchimeláandáLawrence Sapanski, assembled the biggest position in Manulife Financial Corporation (NYSE:MFC). Cinctive Capital Management had $4.2 million invested in the company at the end of the quarter. Parvinder Thiara’s Athanor Capital also initiated a $1.7 million position during the quarter. The other funds with new positions in the stock are Michael Gelband’s ExodusPoint Capital and Kerr Neilson’s Platinum Asset Management.
Let’s now take a look at hedge fund activity in other stocks similar to Manulife Financial Corporation (NYSE:MFC). We will take a look at Willis Towers Watson Public Limited Company (NASDAQ:WLTW), Wipro Limited (NYSE:WIT), Motorola Solutions Inc (NYSE:MSI), Marvell Technology Group Ltd. (NASDAQ:MRVL), Franco-Nevada Corporation (NYSE:FNV), The Clorox Company (NYSE:CLX), and Ford Motor Company (NYSE:F). This group of stocks’ market values match MFC’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 33.4 hedge funds with bullish positions and the average amount invested in these stocks was $1223 million. That figure was $197 million in MFC’s case. Willis Towers Watson Public Limited Company (NASDAQ:WLTW) is the most popular stock in this table. On the other hand Wipro Limited (NYSE:WIT) is the least popular one with only 9 bullish hedge fund positions. Manulife Financial Corporation (NYSE:MFC) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for MFC is 51.3. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. A small number of hedge funds were also right about betting on MFC as the stock returned 27.9% since the end of the third quarter (through 12/14) and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.