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 Markel Corporation (NYSE:MKL).
Is MKL a good stock to buy? Prominent investors were buying. The number of long hedge fund bets rose by 1 recently. Markel Corporation (NYSE:MKL) was in 34 hedge funds’ portfolios at the end of September. The all time high for this statistic is 37. Our calculations also showed that MKL 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 33 hedge funds in our database with MKL holdings at the end of June.
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 leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy 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 we’re going to view the latest hedge fund action surrounding Markel Corporation (NYSE:MKL).
Do Hedge Funds Think MKL Is A Good Stock To Buy Now?
At the end of September, a total of 34 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 3% from the second quarter of 2020. On the other hand, there were a total of 31 hedge funds with a bullish position in MKL a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Charles Akre’s Akre Capital Management has the largest position in Markel Corporation (NYSE:MKL), worth close to $461.8 million, amounting to 3.3% of its total 13F portfolio. Sitting at the No. 2 spot is Renaissance Technologies, which holds a $136.5 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors that hold long positions comprise Brian Ashford-Russell and Tim Woolley’s Polar Capital, Wallace Weitz’s Wallace R. Weitz & Co. and Francois Rochon’s Giverny Capital. In terms of the portfolio weights assigned to each position Giverny Capital allocated the biggest weight to Markel Corporation (NYSE:MKL), around 3.99% of its 13F portfolio. Akre Capital Management is also relatively very bullish on the stock, dishing out 3.26 percent of its 13F equity portfolio to MKL.
As one would reasonably expect, specific money managers were breaking ground themselves. Point72 Asset Management, managed by Steve Cohen, established the biggest position in Markel Corporation (NYSE:MKL). Point72 Asset Management had $34.8 million invested in the company at the end of the quarter. Michael Gelband’s ExodusPoint Capital also made a $19.5 million investment in the stock during the quarter. The following funds were also among the new MKL investors: Peter Seuss’s Prana Capital Management, Dmitry Balyasny’s Balyasny Asset Management, and Ran Pang’s Quantamental Technologies.
Let’s go over hedge fund activity in other stocks similar to Markel Corporation (NYSE:MKL). These stocks are Pool Corporation (NASDAQ:POOL), Carnival Corporation (NYSE:CCL), POSCO (NYSE:PKX), J.B. Hunt Transport Services, Inc. (NASDAQ:JBHT), HubSpot Inc (NYSE:HUBS), Mid America Apartment Communities Inc (NYSE:MAA), and Hartford Financial Services Group Inc (NYSE:HIG). This group of stocks’ market values are similar to MKL’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
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As you can see these stocks had an average of 32.1 hedge funds with bullish positions and the average amount invested in these stocks was $603 million. That figure was $1015 million in MKL’s case. HubSpot Inc (NYSE:HUBS) is the most popular stock in this table. On the other hand POSCO (NYSE:PKX) is the least popular one with only 11 bullish hedge fund positions. Markel Corporation (NYSE:MKL) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for MKL is 73.2. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 33.3% in 2020 through December 18th and beat the market again by 16.4 percentage points. Unfortunately MKL wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on MKL were disappointed as the stock returned 1.5% since the end of September (through 12/18) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.