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Should You Avoid Erie Indemnity Company (ERIE)?

We at Insider Monkey have gone over 821 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, near the height of the coronavirus market crash. In this article, we look at what those funds think of Erie Indemnity Company (NASDAQ:ERIE) based on that data.

Is Erie Indemnity Company (NASDAQ:ERIE) the right pick for your portfolio? Money managers are becoming less confident. The number of bullish hedge fund positions fell by 3 recently. Our calculations also showed that ERIE isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.

According to most investors, hedge funds are perceived as unimportant, old investment vehicles of the past. While there are over 8000 funds trading at the moment, We look at the upper echelon of this group, about 850 funds. These hedge fund managers control the lion’s share of the smart money’s total asset base, and by monitoring their unrivaled equity investments, Insider Monkey has unearthed a few investment strategies that have historically exceeded the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy outpaced the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Donald Sussman Paloma Partners

Donald Sussman of Paloma Partners

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to take a look at the key hedge fund action encompassing Erie Indemnity Company (NASDAQ:ERIE).

What have hedge funds been doing with Erie Indemnity Company (NASDAQ:ERIE)?

At the end of the first quarter, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, a change of -15% from the fourth quarter of 2019. By comparison, 17 hedge funds held shares or bullish call options in ERIE a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were upping their stakes significantly (or already accumulated large positions).

Is ERIE A Good Stock To Buy?

According to Insider Monkey’s hedge fund database, Chuck Royce’s Royce & Associates has the biggest position in Erie Indemnity Company (NASDAQ:ERIE), worth close to $18.5 million, accounting for 0.3% of its total 13F portfolio. Sitting at the No. 2 spot is Renaissance Technologies, which holds a $13.1 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other professional money managers with similar optimism encompass Cliff Asness’s AQR Capital Management, Israel Englander’s Millennium Management and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Royce & Associates allocated the biggest weight to Erie Indemnity Company (NASDAQ:ERIE), around 0.25% of its 13F portfolio. Caxton Associates LP is also relatively very bullish on the stock, setting aside 0.06 percent of its 13F equity portfolio to ERIE.

Judging by the fact that Erie Indemnity Company (NASDAQ:ERIE) has faced falling interest from the entirety of the hedge funds we track, it’s easy to see that there exists a select few hedgies who were dropping their positions entirely by the end of the first quarter. Interestingly, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital dropped the largest stake of the 750 funds tracked by Insider Monkey, comprising an estimated $4.4 million in stock. Noam Gottesman’s fund, GLG Partners, also cut its stock, about $3.5 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest dropped by 3 funds by the end of the first quarter.

Let’s check out hedge fund activity in other stocks similar to Erie Indemnity Company (NASDAQ:ERIE). We will take a look at Apollo Global Management Inc (NYSE:APO), Globe Life Inc. (NYSE:GL), RPM International Inc. (NYSE:RPM), and Host Hotels and Resorts Inc (NYSE:HST). This group of stocks’ market caps match ERIE’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
APO 34 1487468 5
GL 22 574230 -1
RPM 22 191448 -9
HST 24 130445 -3
Average 25.5 595898 -2

View table here if you experience formatting issues.

As you can see these stocks had an average of 25.5 hedge funds with bullish positions and the average amount invested in these stocks was $596 million. That figure was $63 million in ERIE’s case. Apollo Global Management Inc (NYSE:APO) is the most popular stock in this table. On the other hand Globe Life Inc. (NYSE:GL) is the least popular one with only 22 bullish hedge fund positions. Compared to these stocks Erie Indemnity Company (NASDAQ:ERIE) is even less popular than GL. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.4% in 2020 through June 22nd but managed to beat the market by 15.9 percentage points. A small number of hedge funds were also right about betting on ERIE, though not to the same extent, as the stock returned 24.6% during the second quarter (through June 22nd) and outperformed the market as well.

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