Were Hedge Funds Right About Marsh & McLennan (MMC)?

We at Insider Monkey have gone over 887 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 December 31st. In this article, we look at what those funds think of Marsh & McLennan Companies, Inc. (NYSE:MMC) based on that data.

Is Marsh & McLennan Companies, Inc. (NYSE:MMC) a buy here? The smart money was becoming hopeful. The number of bullish hedge fund bets went up by 8 in recent months. Marsh & McLennan Companies, Inc. (NYSE:MMC) was in 43 hedge funds’ portfolios at the end of December. The all time high for this statistic was previously 38. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that MMC isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

To the average investor there are a lot of methods shareholders employ to evaluate stocks. A pair of the most innovative methods are hedge fund and insider trading sentiment. Our experts have shown that, historically, those who follow the best picks of the elite fund managers can outperform their index-focused peers by a solid margin (see the details here). Also, our monthly newsletter’s portfolio of long stock picks returned 197% since March 2017 (through March 2021) and beat the S&P 500 Index by 124 percentage points. You can download a sample issue of this newsletter on our website .

Ric Dillon Diamond Hill Capital

Ric Dillon of Diamond Hill Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best hydrogen fuel cell stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Now we’re going to take a glance at the new hedge fund action encompassing Marsh & McLennan Companies, Inc. (NYSE:MMC).

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

Heading into the first quarter of 2021, a total of 43 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 23% from the third quarter of 2020. By comparison, 31 hedge funds held shares or bullish call options in MMC a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were upping their stakes considerably (or already accumulated large positions).

The largest stake in Marsh & McLennan Companies, Inc. (NYSE:MMC) was held by Berkshire Hathaway, which reported holding $499.3 million worth of stock at the end of December. It was followed by Diamond Hill Capital with a $223.6 million position. Other investors bullish on the company included Polar Capital, Viking Global, and Intermede Investment Partners. In terms of the portfolio weights assigned to each position 3G Sahana Capital Management allocated the biggest weight to Marsh & McLennan Companies, Inc. (NYSE:MMC), around 11.38% of its 13F portfolio. Bishop Rock Capital is also relatively very bullish on the stock, dishing out 5.2 percent of its 13F equity portfolio to MMC.

As one would reasonably expect, key money managers were leading the bulls’ herd. Berkshire Hathaway, managed by Warren Buffett, initiated the most valuable position in Marsh & McLennan Companies, Inc. (NYSE:MMC). Berkshire Hathaway had $499.3 million invested in the company at the end of the quarter. Andreas Halvorsen’s Viking Global also made a $154.5 million investment in the stock during the quarter. The other funds with new positions in the stock are Dmitry Balyasny’s Balyasny Asset Management, Michael Kharitonov and Jon David McAuliffe’s Voleon Capital, and Nicholas Bagnall’s Te Ahumairangi Investment Management.

Let’s now review hedge fund activity in other stocks similar to Marsh & McLennan Companies, Inc. (NYSE:MMC). These stocks are VMware, Inc. (NYSE:VMW), Atlassian Corporation Plc (NASDAQ:TEAM), The Progressive Corporation (NYSE:PGR), Ferrari N.V. (NYSE:RACE), ABB Ltd (NYSE:ABB), Workday Inc (NASDAQ:WDAY), and Takeda Pharmaceutical Company Limited (NYSE:TAK). This group of stocks’ market caps resemble MMC’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
VMW 35 405815 4
TEAM 69 4932963 21
PGR 48 1744884 1
RACE 29 1527088 -2
ABB 8 467566 -5
WDAY 80 4443166 6
TAK 18 835529 -1
Average 41 2051002 3.4

View table here if you experience formatting issues.

As you can see these stocks had an average of 41 hedge funds with bullish positions and the average amount invested in these stocks was $2051 million. That figure was $1747 million in MMC’s case. Workday Inc (NASDAQ:WDAY) is the most popular stock in this table. On the other hand ABB Ltd (NYSE:ABB) is the least popular one with only 8 bullish hedge fund positions. Marsh & McLennan Companies, Inc. (NYSE:MMC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for MMC is 64.3. 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 10 most popular stocks among hedge funds returned 90.7% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 35 percentage points. These stocks gained 13.6% in 2021 through April 30th and still beat the market by 1.6 percentage points. Hedge funds were also right about betting on MMC as the stock returned 16.9% since the end of Q4 (through 4/30) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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