At Insider Monkey we track the activity of some of the best-performing hedge funds like Appaloosa Management, Baupost, and Tiger Global because we determined that some of the stocks that they are collectively bullish on can help us generate returns above the broader indices. Out of thousands of stocks that hedge funds invest in, small-caps can provide the best returns over the long term due to the fact that these companies are less efficiently priced and are usually under the radars of mass-media, analysts and dumb money. This is why we follow the smart money moves in the small-cap space.
Is Selective Insurance Group, Inc. (NASDAQ:SIGI) the right investment to pursue these days? Investors who are in the know are taking an optimistic view. The number of bullish hedge fund bets advanced by 4 recently. Our calculations also showed that SIGI isn’t among the 30 most popular stocks among hedge funds.
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 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
We’re going to go over the key hedge fund action surrounding Selective Insurance Group, Inc. (NASDAQ:SIGI).
Hedge fund activity in Selective Insurance Group, Inc. (NASDAQ:SIGI)
At Q4’s end, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 40% from the previous quarter. By comparison, 11 hedge funds held shares or bullish call options in SIGI a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, John D. Gillespie’s Prospector Partners has the most valuable position in Selective Insurance Group, Inc. (NASDAQ:SIGI), worth close to $8.5 million, amounting to 1.3% of its total 13F portfolio. Coming in second is Cliff Asness of AQR Capital Management, with a $5.2 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining members of the smart money that hold long positions include Jim Simons’s Renaissance Technologies, Noam Gottesman’s GLG Partners and Israel Englander’s Millennium Management.
Now, key money managers were leading the bulls’ herd. Holocene Advisors, managed by Brandon Haley, created the largest position in Selective Insurance Group, Inc. (NASDAQ:SIGI). Holocene Advisors had $0.9 million invested in the company at the end of the quarter. Minhua Zhang’s Weld Capital Management also made a $0.9 million investment in the stock during the quarter. The other funds with new positions in the stock are Paul Marshall and Ian Wace’s Marshall Wace LLP, D. E. Shaw’s D E Shaw, and Hoon Kim’s Quantinno Capital.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Selective Insurance Group, Inc. (NASDAQ:SIGI) but similarly valued. We will take a look at Rayonier Inc. (NYSE:RYN), PS Business Parks Inc (NYSE:PSB), CACI International Inc (NYSE:CACI), and Urban Outfitters, Inc. (NASDAQ:URBN). This group of stocks’ market values resemble SIGI’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 19.25 hedge funds with bullish positions and the average amount invested in these stocks was $215 million. That figure was $26 million in SIGI’s case. Urban Outfitters, Inc. (NASDAQ:URBN) is the most popular stock in this table. On the other hand PS Business Parks Inc (NYSE:PSB) is the least popular one with only 12 bullish hedge fund positions. Selective Insurance Group, Inc. (NASDAQ:SIGI) 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. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately SIGI wasn’t nearly as popular as these 15 stock (hedge fund sentiment was quite bearish); SIGI investors were disappointed as the stock returned 12.2% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.