Is Rio Tinto plc (ADR) (RIO) Going to Burn These Hedge Funds?

With a general bullishness amongst the heavyweights, key money managers were breaking ground themselves. Luminus Management assembled the biggest position in Rio Tinto plc (ADR) (NYSE:RIO). Luminus Management had $7.1 million invested in the company at the end of the quarter. John Thiessen’s Vertex One Asset Management also made a $6.8 million investment in the stock during the quarter. The following funds were also among the new RIO investors: Sander Gerber’s Hudson Bay Capital Management and David Costen Haley’s HBK Investments.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Rio Tinto plc (ADR) (NYSE:RIO) but similarly valued. We will take a look at Morgan Stanley (NYSE:MS), Valeant Pharmaceuticals Intl Inc (NYSE:VRX), Kinder Morgan Inc (NYSE:KMI), and Abbott Laboratories (NYSE:ABT). This group of stocks’ market caps resemble RIO’s market cap.

As you can see these stocks had an average of 68 hedge funds with bullish positions and the average amount invested in these stocks was $6.0 billion, compared to just $147 million in RIO’s case. Valeant Pharmaceuticals Intl Inc (NYSE:VRX) is the most popular stock in this table, while Abbott Laboratories (NYSE:ABT) is the least popular one with only 55 bullish hedge fund positions. Compared to these stocks Rio Tinto plc (ADR) (NYSE:RIO) is even less popular than ABT. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.