Validus Holdings, Ltd. (NYSE:VR) was in 22 hedge funds’ portfolio at the end of the first quarter of 2013. VR investors should pay attention to an increase in hedge fund sentiment recently. There were 21 hedge funds in our database with VR positions at the end of the previous quarter.
In the eyes of most shareholders, hedge funds are perceived as underperforming, outdated investment tools of years past. While there are greater than 8000 funds with their doors open at the moment, we hone in on the aristocrats of this group, about 450 funds. It is estimated that this group has its hands on the lion’s share of the hedge fund industry’s total capital, and by watching their top equity investments, we have figured out a few investment strategies that have historically outperformed Mr. Market. Our small-cap hedge fund strategy outpaced the S&P 500 index by 18 percentage points per annum for a decade in our back tests, and since we’ve began to sharing our picks with our subscribers at the end of August 2012, we have trumped the S&P 500 index by 23.3 percentage points in 8 months (explore the details and some picks here).
Equally as important, bullish insider trading activity is a second way to parse down the world of equities. Obviously, there are plenty of incentives for a bullish insider to sell shares of his or her company, but just one, very clear reason why they would initiate a purchase. Many academic studies have demonstrated the valuable potential of this tactic if shareholders understand what to do (learn more here).
With all of this in mind, we’re going to take a peek at the latest action regarding Validus Holdings, Ltd. (NYSE:VR).
Hedge fund activity in Validus Holdings, Ltd. (NYSE:VR)
Heading into Q2, a total of 22 of the hedge funds we track were bullish in this stock, a change of 5% from the previous quarter. With hedgies’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were boosting their holdings meaningfully.
Of the funds we track, Adage Capital Management, managed by Phill Gross and Robert Atchinson, holds the largest position in Validus Holdings, Ltd. (NYSE:VR). Adage Capital Management has a $40 million position in the stock, comprising 0.1% of its 13F portfolio. Sitting at the No. 2 spot is Omega Advisors, managed by Leon Cooperman, which held a $37.3 million position; 0.6% of its 13F portfolio is allocated to the stock. Other peers that hold long positions include Ken Griffin’s Citadel Investment Group, Robert Pitts’s Steadfast Capital Management and SAC Subsidiary’s CR Intrinsic Investors.
As industrywide interest jumped, specific money managers were leading the bulls’ herd. AQR Capital Management, managed by Cliff Asness, established the most valuable position in Validus Holdings, Ltd. (NYSE:VR). AQR Capital Management had 16.1 million invested in the company at the end of the quarter. Jim Simons’s Renaissance Technologies also initiated a $6.4 million position during the quarter. The other funds with brand new VR positions are Alec Litowitz and Ross Laser’s Magnetar Capital and Paul Tudor Jones’s Tudor Investment Corp.
How are insiders trading Validus Holdings, Ltd. (NYSE:VR)?
Insider buying is particularly usable when the company in question has seen transactions within the past half-year. Over the latest six-month time frame, Validus Holdings, Ltd. (NYSE:VR) has experienced 2 unique insiders buying, and 2 insider sales (see the details of insider trades here).
Let’s also examine hedge fund and insider activity in other stocks similar to Validus Holdings, Ltd. (NYSE:VR). These stocks are Markel Corporation (NYSE:MKL), White Mountains Insurance Group Ltd (NYSE:WTM), HCC Insurance Holdings, Inc. (NYSE:HCC), American Financial Group (NYSE:AFG), and RenaissanceRe Holdings Ltd. (NYSE:RNR). This group of stocks are in the property & casualty insurance industry and their market caps resemble VR’s market cap.
|Company Name||# of Hedge Funds||# of Insiders Buying||# of Insiders Selling|
|Markel Corporation (NYSE:MKL)||15||3||1|
|White Mountains Insurance Group Ltd (NYSE:WTM)||9||1||2|
|HCC Insurance Holdings, Inc. (NYSE:HCC)||15||0||3|
|American Financial Group (NYSE:AFG)||13||0||9|
|RenaissanceRe Holdings Ltd. (NYSE:RNR)||16||0||9|
With the returns demonstrated by the aforementioned studies, everyday investors should always keep an eye on hedge fund and insider trading activity, and Validus Holdings, Ltd. (NYSE:VR) shareholders fit into this picture quite nicely.