Is SLF A Good Stock To Buy Now?

Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Sun Life Financial Inc. (NYSE:SLF).

Is SLF a good stock to buy now? Sun Life Financial Inc. (NYSE:SLF) has seen a decrease in activity from the world’s largest hedge funds of late. Sun Life Financial Inc. (NYSE:SLF) was in 13 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 16. There were 14 hedge funds in our database with SLF positions at the end of the second quarter. Our calculations also showed that SLF 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).

Video: Watch our video about the top 5 most popular hedge fund stocks.

Today there are a lot of methods market participants use to appraise their holdings. Two of the best methods are hedge fund and insider trading activity. Our researchers have shown that, historically, those who follow the best picks of the top fund managers can outpace the S&P 500 by a solid margin (see the details here).

Blair Levinsky of Waratah Capital Advisors

Blair Levinsky of Waratah Capital Advisors

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. With all of this in mind we’re going to take a glance at the key hedge fund action surrounding Sun Life Financial Inc. (NYSE:SLF).

Do Hedge Funds Think SLF Is A Good Stock To Buy Now?

At the end of the third quarter, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -7% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards SLF over the last 21 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Citadel Investment Group held the most valuable stake in Sun Life Financial Inc. (NYSE:SLF), which was worth $10.8 million at the end of the third quarter. On the second spot was GLG Partners which amassed $5 million worth of shares. Renaissance Technologies, Athanor Capital, and AlphaCrest Capital Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Unio Capital allocated the biggest weight to Sun Life Financial Inc. (NYSE:SLF), around 0.23% of its 13F portfolio. AlphaCrest Capital Management is also relatively very bullish on the stock, dishing out 0.19 percent of its 13F equity portfolio to SLF.

Judging by the fact that Sun Life Financial Inc. (NYSE:SLF) has witnessed falling interest from the smart money, it’s safe to say that there was a specific group of hedgies who were dropping their full holdings in the third quarter. It’s worth mentioning that Richard SchimeláandáLawrence Sapanski’s Cinctive Capital Management dumped the biggest investment of the 750 funds monitored by Insider Monkey, worth an estimated $6.6 million in stock, and Dmitry Balyasny’s Balyasny Asset Management was right behind this move, as the fund said goodbye to about $4.6 million worth. These transactions are intriguing to say the least, as total hedge fund interest was cut by 1 funds in the third quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Sun Life Financial Inc. (NYSE:SLF) but similarly valued. These stocks are New Oriental Education & Technology Group Inc. (NYSE:EDU), Unity Software Inc. (NYSE:U), American International Group Inc (NYSE:AIG), Genmab A/S (NASDAQ:GMAB), Hilton Worldwide Holdings Inc (NYSE:HLT), Palo Alto Networks Inc (NYSE:PANW), and Roku, Inc. (NASDAQ:ROKU). This group of stocks’ market caps are closest to SLF’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
EDU 40 1753600 1
U 35 6701726 35
AIG 38 1770145 -2
GMAB 18 203437 3
HLT 57 5109622 4
PANW 59 3197324 8
ROKU 59 1030571 18
Average 43.7 2823775 9.6

View table here if you experience formatting issues.

As you can see these stocks had an average of 43.7 hedge funds with bullish positions and the average amount invested in these stocks was $2824 million. That figure was $28 million in SLF’s case. Palo Alto Networks Inc (NYSE:PANW) is the most popular stock in this table. On the other hand Genmab A/S (NASDAQ:GMAB) is the least popular one with only 18 bullish hedge fund positions. Compared to these stocks Sun Life Financial Inc. (NYSE:SLF) is even less popular than GMAB. Our overall hedge fund sentiment score for SLF is 28.4. 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 32.9% in 2020 through December 8th but managed to beat the market by 16.2 percentage points. A small number of hedge funds were also right about betting on SLF, though not to the same extent, as the stock returned 10.6% since the end of September (through December 8th) and outperformed the market as well.

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Disclosure: None. This article was originally published at Insider Monkey.