Should You Add Regal Entertainment Group (RGC) to Your Portfolio?

Hedge funds run by legendary names like Nelson Peltz and David Tepper make billions of dollars a year for themselves and their super-rich accredited investors (you’ve got to have a minimum of $1 million liquid to invest in a hedge fund) by spending enormous resources on analyzing and uncovering data about small-cap stocks that the big brokerage houses don’t follow. Small caps are where they can generate significant out-performance. These stocks have been on a tear since the end of June, outperforming large-cap index funds by more than 10 percentage points. That’s why we pay special attention to hedge fund activity in these stocks.

One stock that registered an increase in hedge fund sentiment is Regal Entertainment Group (NYSE:RGC), in which 19 funds tracked by Insider Monkey held long positions at the end of September, compared to 18 funds a quarter earlier. At the end of this article we will also compare RGC to other stocks including Sprouts Farmers Market Inc (NASDAQ:SFM), Rice Energy Inc (NYSE:RICE), and NCR Corporation (NYSE:NCR) to get a better sense of its popularity.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

Now, let’s check out the recent action surrounding Regal Entertainment Group (NYSE:RGC).

Hedge fund activity in Regal Entertainment Group (NYSE:RGC)

Heading into the fourth quarter of 2016, 19 of the hedge funds tracked by Insider Monkey held long positions in Regal Entertainment Group, up by 6% from the end of June. Below, you can check out the change in hedge fund sentiment towards RGC over the last five quarters. With hedge funds’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were upping their holdings substantially (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Balyasny Asset Management, led by Dmitry Balyasny, holds the largest position in Regal Entertainment Group (NYSE:RGC). Balyasny Asset Management has a $37.7 million position in the stock, comprising 0.2% of its 13F portfolio. The second largest stake is held by Polaris Capital Management, led by Bernard Horn, which holds a $24.2 million position; the fund has 1.9% of its 13F portfolio invested in the stock. Other members of the smart money that hold long positions comprise Jim Simons’ Renaissance Technologies and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

As industrywide interest jumped, some big names were leading the bulls’ herd. Balyasny Asset Management established the most valuable position in Regal Entertainment Group (NYSE:RGC). Steve Cohen’s Point72 Asset Management also initiated a $15.9 million position during the third quarter. The following funds were also among the new RGC investors: Ken Griffin’s Citadel Investment Group, Daniel S. Och’s OZ Management, and Israel Englander’s Millennium Management.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Regal Entertainment Group (NYSE:RGC) but similarly valued. We will take a look at Sprouts Farmers Market Inc (NASDAQ:SFM), Rice Energy Inc (NYSE:RICE), NCR Corporation (NYSE:NCR), and WEX Inc (NYSE:WEX). This group of stocks’ market values match RGC’s market value.

As you can see these stocks had an average of 26 funds with bullish positions and the average amount invested in these stocks was $443 million, versus $158 million in RGC’s case. Rice Energy Inc (NYSE:RICE) is the most popular stock in this table. On the other hand WEX Inc (NYSE:WEX) is the least popular one with only 10 bullish hedge fund positions. Regal Entertainment Group (NYSE:RGC) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard Rice Energy Inc (NYSE:RICE) might be a better candidate to consider taking a long position in.

Disclosure: none