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Were Hedge Funds Illusioned With Hartford Financial Services Group Inc (HIG)?

How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Hartford Financial Services Group Inc (NYSE:HIG) and determine whether hedge funds had an edge regarding this stock.

Is Hartford Financial Services Group Inc (NYSE:HIG) a cheap investment today? The best stock pickers were in a pessimistic mood. The number of bullish hedge fund positions decreased by 9 in recent months. Hartford Financial Services Group Inc (NYSE:HIG) was in 34 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 57. Our calculations also showed that HIG isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

David E. Shaw of D.E. Shaw

David E. Shaw of D.E. Shaw

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV 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. With all of this in mind let’s check out the key hedge fund action encompassing Hartford Financial Services Group Inc (NYSE:HIG).

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

At the end of the third quarter, a total of 34 of the hedge funds tracked by Insider Monkey were long this stock, a change of -21% from one quarter earlier. By comparison, 36 hedge funds held shares or bullish call options in HIG a year ago. With hedgies’ sentiment swirling, there exists a few key hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).

Is HIG A Good Stock To Buy?

Is HIG A Good Stock To Buy?

More specifically, Adage Capital Management was the largest shareholder of Hartford Financial Services Group Inc (NYSE:HIG), with a stake worth $140.3 million reported as of the end of September. Trailing Adage Capital Management was D E Shaw, which amassed a stake valued at $111.1 million. Schonfeld Strategic Advisors, Millennium Management, and Citadel Investment Group were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Prana Capital Management allocated the biggest weight to Hartford Financial Services Group Inc (NYSE:HIG), around 3.82% of its 13F portfolio. Fir Tree is also relatively very bullish on the stock, designating 1.77 percent of its 13F equity portfolio to HIG.

Judging by the fact that Hartford Financial Services Group Inc (NYSE:HIG) has experienced bearish sentiment from hedge fund managers, it’s easy to see that there lies a certain “tier” of fund managers that elected to cut their entire stakes heading into Q4. Intriguingly, Matthew Stadelman’s Diamond Hill Capital dropped the largest position of all the hedgies monitored by Insider Monkey, comprising about $439.6 million in stock, and Benjamin Pass’s TOMS Capital was right behind this move, as the fund sold off about $36.9 million worth. These transactions are important to note, as total hedge fund interest dropped by 9 funds heading into Q4.

Let’s check out hedge fund activity in other stocks similar to Hartford Financial Services Group Inc (NYSE:HIG). These stocks are Hess Corporation (NYSE:HES), Devon Energy Corporation (NYSE:DVN), ZoomInfo Technologies Inc. (NASDAQ:ZI), Caesars Entertainment Inc. (NASDAQ:CZR), Credit Suisse Group AG (NYSE:CS), Rogers Communications Inc. (NYSE:RCI), and Splunk Inc (NASDAQ:SPLK). This group of stocks’ market caps are closest to HIG’s market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HES,27,726783,-4 DVN,48,1400610,-2 ZI,57,1960736,22 CZR,64,1882913,-9 CS,8,76139,-2 RCI,17,366650,0 SPLK,47,1251280,0 Average,38.3,1095016,0.7 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 38.3 hedge funds with bullish positions and the average amount invested in these stocks was $1095 million. That figure was $942 million in HIG’s case. Caesars Entertainment Inc. (NASDAQ:CZR) is the most popular stock in this table. On the other hand Credit Suisse Group AG (NYSE:CS) is the least popular one with only 8 bullish hedge fund positions. Hartford Financial Services Group Inc (NYSE:HIG) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for HIG is 37.1. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 29.6% in 2021 and still managed to beat the market by another 3.6 percentage points. Hedge funds were somewhat right about betting on HIG as the stock returned 2.9% since the end of September (through January 31st) and outperformed the top 5 hedge fund stocks but not the market. This is a rare phenomenon as top hedge fund stocks usually beat the market over the long-term.

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