Hedge Funds Are Dumping Reliance Steel & Aluminum Co (RS) Too

The market has been volatile due to elections and the potential of another Federal Reserve rate increase. Small cap stocks have been on a tear, as the Russell 2000 ETF (IWM) has outperformed the larger S&P 500 ETF (SPY) by more than 10 percentage points since the end of June. SEC filings and hedge fund investor letters indicate that the smart money seems to be getting back in stocks, and the funds’ movements is one of the reasons why small-cap stocks are red hot. In this article, we analyze what the smart money thinks of Reliance Steel & Aluminum Co (NYSE:RS) and find out how it is affected by hedge funds’ moves.

A couple of weeks ago we reported insider sales at Reliance Steel & Aluminum Co (NYSE:RS). Recent hedge fund filings indicated that some hedge fund managers are also losing interest in the company. RS was in 22 hedge funds’ portfolios at the end of September. There were 27 hedge funds in our database with RS holdings at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Gol Linhas Aereas Inteligentes SA (ADR) (NYSE:GOL), West Pharmaceutical Services Inc. (NYSE:WST), and EnLink Midstream Partners LP (NYSE:ENLK) to gather more data points.

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With all of this in mind, we’re going to take a look at the new action surrounding Reliance Steel & Aluminum Co (NYSE:RS).

How are hedge funds trading Reliance Steel & Aluminum Co (NYSE:RS)?

At Q3’s end, a total of 22 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -19% from one quarter earlier. With hedgies’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Cliff Asness’s AQR Capital Management has the number one position in Reliance Steel & Aluminum Co (NYSE:RS), worth close to $101.7 million, accounting for 0.2% of its total 13F portfolio. The second largest stake is held by Royce & Associates, led by Chuck Royce, holding a $92 million position; the fund has 0.6% of its 13F portfolio invested in the stock. Some other peers that are bullish encompass Phill Gross and Robert Atchinson’s Adage Capital Management, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and Israel Englander’s Millennium Management.

Since Reliance Steel & Aluminum Co (NYSE:RS) has experienced falling interest from the entirety of the hedge funds we track, it’s easy to see that there lies a certain “tier” of funds that elected to cut their entire stakes in the third quarter. Interestingly, billionaire Jorge Paulo Lemann’s 3G Capital said goodbye to the largest investment of all the hedgies monitored by Insider Monkey, comprising close to $38.5 million in stock, and billionaire Bruce Kovner’s Caxton Associates LP was right behind this move, as the fund cut about $10.8 million worth. These transactions are important to note, as total hedge fund interest was cut by 5 funds in the third quarter.

Let’s also examine hedge fund activity in other stocks similar to Reliance Steel & Aluminum Co (NYSE:RS). We will take a look at Gol Linhas Aereas Inteligentes SA (ADR) (NYSE:GOL), West Pharmaceutical Services Inc. (NYSE:WST), EnLink Midstream Partners LP (NYSE:ENLK), and KKR & Co. L.P. (NYSE:KKR). This group of stocks’ market values are closest to RS’s market value.

As you can see these stocks had an average of 13.5 hedge funds with bullish positions and the average amount invested in these stocks was $241 million. That figure was $440 million in RS’s case. KKR & Co. L.P. (NYSE:KKR) is the most popular stock in this table. On the other hand Gol Linhas Aereas Inteligentes SA (ADR) (NYSE:GOL) is the least popular one with only 6 bullish hedge fund positions. Reliance Steel & Aluminum Co (NYSE:RS) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard KKR might be a better candidate to consider a long position.