StanCorp Financial Group, Inc. (NYSE:SFG) reported its second quarter earnings in the after-hours on Thursday. The insurance provider reported earnings of $64.3 million or $1.50 per share for the quarter. The company reported earnings of $40.8 million or $0.93 per share during the same period in 2014. The insurance provider managed to easily beat the consensus expectation of $1.22 per share. The company attributed the increased income to a favorable claim experience, higher commissions, and bonuses. Year-to-date, StanCorp Financial Group, Inc. (NYSE:SFG) has reported EPS of $2.82, compared to $2.02 EPS during the first half of 2014. Looking at different business sectors: in the insurance sector, StanCorp Financial Group, Inc. (NYSE:SFG) reported total income before income taxes of $74.7 million for the second quarter, $30.7 million more than a year ago. In the Asset management sector, the company reported total income before income taxes of $24.5 million for the second quarter, a year-over-year increase of $2.5 million. In other businesses, the company reported a total loss of $9.8 million, compared to a loss of $8.7 million in the second quarter of 2014. Along with the earnings, earlier today, the Japan-based Meiji Yasuda Life Insurance Co. agreed to takeover the Oregon-based StanCorp Financial Group, Inc. (NYSE:SFG) in a deal worth $5 billion. Meiji Yasuda announced that it would pay a 50% premium on StanCorp’s closing price on Thursday. This news combined sent the stock skyrocketing by more than 48% as it started trading today. Were hedge funds expecting this? And which ones cashed in on the deal? Let’s find out.
Heading into the second quarter, a total of seven of the hedge funds tracked by Insider Monkey held long positions in StanCorp Financial Group, Inc. (NYSE:SFG), with a total investment of $75.9 million, 5.6% lower than the total investment in the stock held by ten hedge funds at the end of 2014. Meanwhile, the stock lost 1.8% of its value during the January – March period. This shows that the hedge funds opted to pull money out of the stock during the first three months, and clearly weren’t expecting a deal like this coming down in the near future.
Most investors don’t understand hedge funds and indicators that are based on hedge fund and insider activity. They ignore hedge funds because of their recent poor performance in the long-running bull market. Our research indicates that hedge funds underperformed because they aren’t 100% long. Hedge fund fees are also very large compared to the returns generated and they reduce the net returns enjoyed (or not) by investors. We uncovered through extensive research that hedge funds’ long positions in small-cap stocks actually greatly outperformed the market from 1999 to 2012, and built a system around this. The 15 most popular small-cap stocks among funds beat the S&P 500 Index by more than 80 percentage points since the end of August 2012 when this system went live, returning a cumulative 139.7% vs. 58.7% for the S&P 500 Index (read the details).
Likewise, other research (not our own) has shown insider purchases are also effective piggybacking methods for investors that lead to greater returns. That’s why we believe investors should pay attention to what hedge funds and insiders are buying and keep them apprised of this information. Looking at StanCorp Financial Group, Inc. (NYSE:SFG), there have been no insider purchases of the stock this year, but there have been a few insider sales. Senior Vice President at StanCorp, David O’Brien sold around 13,000 shares and Vice President of the Asset Management Group, James Harbolt, sold around 6,800 shares this year.
With all of this in mind, let’s take a look at the latest action surrounding StanCorp Financial Group, Inc. (NYSE:SFG).
What does the smart money think about StanCorp Financial Group, Inc. (NYSE:SFG)?
According to Insider Monkey’s hedge fund database, Ken Fisher‘s Fisher Asset Management had the largest position in StanCorp Financial Group, Inc. (NYSE:SFG), with around 527,000 shares worth close to $36.1 million by the end of March, accounting for 0.1% of its total 13F portfolio. The second-most bullish hedge fund manager is Ken Griffin of Citadel Investment Group, with around 264,000 shares valued at $18.1 million; less than 0.1% of its 13F portfolio is allocated to the company. Other members of the smart money that hold long positions encompass Richard S. Pzena’s Pzena Investment Management, Jim Simons‘ Renaissance Technologies, and Cliff Asness‘ AQR Capital Management.
Judging by the fact that StanCorp Financial Group, Inc. (NYSE:SFG) has faced falling interest from the aggregate hedge fund industry, it’s safe to say that there exists a select few fund managers that elected to cut their full holdings in the first quarter. Interestingly, Michael Platt and William Reeves‘ Bluecrest Capital Mgmt said goodbye to the stock by selling around 44,800 shares during the first three months. Peter Muller’s fund, PDT Partners, also sold all of its 22,038 shares during the first trimester.
Taking into account the decreasing interest in StanCorp Financial Group, Inc. (NYSE:SFG) by hedgies, we can say that the hedge funds which opted to pull money out of this stock were wrong to do so, as Meiji Yasuda’s takeover of StanCorp has propelled the stock to new heights. Those hedgies who were long tended to be gargantuan funds with miniscule positions in the company compared to their total holdings. All in all, hedgies appear to have missed out on the big move today.
Disclosure: None
