After a lengthy stretch of outperformance, small-cap stocks suffered from July 2015 through June 2016, as heightened global economic fears led investors to flee to the safe havens of large-cap stocks and other instruments. Those stocks outperformed small-caps by about 10 percentage points during that time, with small-cap healthcare stocks being particularly hard hit. However, the tide has since turned in a big way, as evidenced by small-caps toppling their large-cap peers by 5 percentage points in the third quarter, and by another 5 percentage points in the first seven weeks of the fourth quarter. In this article, we’ll analyze how this shift affected hedge funds’ Q3 trading of Travelers Companies Inc (NYSE:TRV) and see how the stock is affected by the recent hedge fund activity.
Travelers Companies Inc (NYSE:TRV) was in 30 hedge funds’ portfolios at the end of the third quarter of 2016. TRV has seen an increase in activity from the world’s largest hedge funds in recent months. There were 29 hedge funds in our database with TRV positions at the end of the previous quarter. At the end of this article we will also compare TRV to other stocks including Ecolab Inc. (NYSE:ECL), Cognizant Technology Solutions Corp (NASDAQ:CTSH), and Las Vegas Sands Corp. (NYSE:LVS) to get a better sense of its popularity.
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
Now, let’s take a peek at the latest action surrounding Travelers Companies Inc (NYSE:TRV).
Hedge fund activity in Travelers Companies Inc (NYSE:TRV)
At the end of the third quarter, a total of 30 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 3% from the previous quarter. With the smart money’s capital changing hands, there exists a select group of key hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, AQR Capital Management, managed by Cliff Asness, holds the largest position in Travelers Companies Inc (NYSE:TRV). AQR Capital Management has a $305.1 million position in the stock, comprising 0.5% of its 13F portfolio. The second largest stake is held by Winton Capital Management, led by David Harding, holding a $79.6 million position; the fund has 1.4% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors that hold long positions encompass Phill Gross and Robert Atchinson’s Adage Capital Management, Tom Gayner’s Markel Gayner Asset Management and Brian Ashford-Russell and Tim Woolley’s Polar Capital.
As one would reasonably expect, key hedge funds have been driving this bullishness. Citadel Investment Group, managed by Ken Griffin, assembled the most valuable call position in Travelers Companies Inc (NYSE:TRV). Citadel Investment Group had $8.3 million invested in the company at the end of the quarter. Jim Simons’s Renaissance Technologies also initiated a $5.2 million position during the quarter. The following funds were also among the new TRV investors: John D. Gillespie’s Prospector Partners, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, and Benjamin A. Smith’s Laurion Capital Management.
Let’s now take a look at hedge fund activity in other stocks similar to Travelers Companies Inc (NYSE:TRV). We will take a look at Ecolab Inc. (NYSE:ECL), Cognizant Technology Solutions Corp (NASDAQ:CTSH), Las Vegas Sands Corp. (NYSE:LVS), and Anthem Inc (NYSE:ANTM). All of these stocks’ market caps are similar to TRV’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 39 hedge funds with bullish positions and the average amount invested in these stocks was $1.76 billion. That figure was $542 million in TRV’s case. Anthem Inc (NYSE:ANTM) is the most popular stock in this table. On the other hand Ecolab Inc. (NYSE:ECL) is the least popular one with only 24 bullish hedge fund positions. Travelers Companies Inc (NYSE:TRV) 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. In this regard ANTM might be a better candidate to consider a long position.