White Mountains Insurance Group Ltd (NYSE:WTM): Are Hedge Funds Right About This Stock? – RenaissanceRe Holdings Ltd. (NYSE:RNR), HCC Insurance Holdings, Inc. (NYSE:HCC)

Is White Mountains Insurance Group Ltd (NYSE:WTM) a great investment now? Investors who are in the know are becoming more confident. The number of bullish hedge fund bets went up by 2 in recent months.

In the eyes of most market participants, hedge funds are perceived as unimportant, old investment vehicles of years past. While there are greater than 8000 funds with their doors open at present, we look at the top tier of this group, around 450 funds. It is widely believed that this group controls the majority of all hedge funds’ total capital, and by monitoring their top picks, we have come up with a few investment strategies that have historically outpaced the broader indices. 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 started sharing our picks with our subscribers at the end of August 2012, we have outpaced the S&P 500 index by 25 percentage points in 6.5 month (explore the details and some picks here).

RenaissanceRe Holdings Ltd. (NYSE:RNR)

Equally as beneficial, bullish insider trading activity is another way to break down the financial markets. As the old adage goes: there are many incentives for an upper level exec to sell shares of his or her company, but only one, very simple reason why they would behave bullishly. Several empirical studies have demonstrated the useful potential of this tactic if shareholders know what to do (learn more here).

With these “truths” under our belt, let’s take a peek at the key action encompassing White Mountains Insurance Group Ltd (NYSE:WTM).

How are hedge funds trading White Mountains Insurance Group Ltd (NYSE:WTM)?

Heading into 2013, a total of 11 of the hedge funds we track were bullish in this stock, a change of 22% from the third quarter. With the smart money’s positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were increasing their holdings substantially.

According to our comprehensive database, Martin Whitman’s Third Avenue Management had the most valuable position in White Mountains Insurance Group Ltd (NYSE:WTM), worth close to $122 million, accounting for 2.6% of its total 13F portfolio. Coming in second is Jim Simons of Renaissance Technologies, with a $7 million position; the fund has 0% of its 13F portfolio invested in the stock. Remaining hedgies with similar optimism include Ric Dillon’s Diamond Hill Capital, D. E. Shaw’s D E Shaw and Chuck Royce’s Royce & Associates.

As industrywide interest jumped, key money managers have been driving this bullishness. LMR Partners, managed by Ben Levine, Andrew Manuel and Stefan Renold, created the most outsized position in White Mountains Insurance Group Ltd (NYSE:WTM). LMR Partners had 1 million invested in the company at the end of the quarter. John Overdeck and David Siegel’s Two Sigma Advisors also made a $1 million investment in the stock during the quarter. The only other fund with a brand new WTM position is Israel Englander’s Millennium Management.

Insider trading activity in White Mountains Insurance Group Ltd (NYSE:WTM)

Bullish insider trading is best served when the company we’re looking at has experienced transactions within the past 180 days. Over the last half-year time period, White Mountains Insurance Group Ltd (NYSE:WTM) has seen 1 unique insiders buying, and 1 insider sales (see the details of insider trades here).

Let’s also take a look at hedge fund and insider activity in other stocks similar to White Mountains Insurance Group Ltd (NYSE:WTM). These stocks are Allied World Assurance Co Holdings, AG. (NYSE:AWH), RenaissanceRe Holdings Ltd. (NYSE:RNR), Validus Holdings, Ltd. (NYSE:VR), American Financial Group (NYSE:AFG), and HCC Insurance Holdings, Inc. (NYSE:HCC). All of these stocks are in the property & casualty insurance industry and their market caps are closest to WTM’s market cap.

Company Name # of Hedge Funds # of Insiders Buying # of Insiders Selling
Allied World Assurance Co Holdings, AG. (NYSE:AWH) 12 0 2
RenaissanceRe Holdings Ltd. (NYSE:RNR) 11 0 10
Validus Holdings, Ltd. (NYSE:VR) 19 2 1
American Financial Group (NYSE:AFG) 10 0 10
HCC Insurance Holdings, Inc. (NYSE:HCC) 12 0 4

With the results exhibited by the aforementioned research, retail investors should always pay attention to hedge fund and insider trading activity, and White Mountains Insurance Group Ltd (NYSE:WTM) is an important part of this process.

Click here to learn more about Insider Monkey’s Hedge Fund Newsletter

Insider Monkey’s small-cap strategy returned 37% between September 2012 and March 2013 versus 12.9% for the S&P 500 index. Try it now by clicking the link above.