What Hedge Funds Think about Raven Industries, Inc. (RAVN)?

Hedge fund managers like David Einhorn, Dan Loeb, or Carl Icahn became billionaires through reaping large profits for their investors, which is why piggybacking their stock picks may provide us with significant returns as well. Many hedge funds, like Paul Singer’s Elliott Management, are pretty secretive, but we can still get some insights by analyzing their quarterly 13F filings. One of the most fertile grounds for large abnormal returns is hedge funds’ most popular small-cap picks, which are not so widely followed and often trade at a discount to their intrinsic value. In this article we will check out hedge fund activity in another small-cap stock: Raven Industries, Inc. (NASDAQ:RAVN).

Raven Industries, Inc. (NASDAQ:RAVN) saw an increase in enthusiasm from smart money last quarter. At the end of September, 13 funds from our database held shares of RAVN, versus nine funds a quarter earlier. 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 TCP Capital Corp (NASDAQ:TCPC), Ambac Financial Group, Inc. (NASDAQ:AMBC), and Momenta Pharmaceuticals, Inc. (NASDAQ:MNTA) to gather more data points.

We care about hedge fund sentiment because historically hedge funds’ stock picks delivered strong risk adjusted returns. There are certain segments of the market where hedge funds’ stock picks performed much better than its benchmarks. For instance, the 30 most popular mid-cap stocks among the best performing hedge funds returned 18% over the last 12 months outpacing S&P 500 Index by more than 10 percentage points. We developed this strategy 2.5 years ago and started sharing its picks in our quarterly newsletter. It bested the S&P 500 Index ETFs by delivering a solid 39% vs. 22% gain for its benchmarks.

Now, we’re going to check out the fresh action encompassing Raven Industries, Inc. (NASDAQ:RAVN).

Hedge fund activity in Raven Industries, Inc. (NASDAQ:RAVN)

At the end of the third quarter, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on Raven Industries, Inc. (NASDAQ:RAVN), up by 44% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in RAVN over the last 5 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, Royce & Associates, led by Chuck Royce, holds the largest position in Raven Industries, Inc. (NASDAQ:RAVN). Royce & Associates has a $46.2 million position in the stock, comprising 0.3% of its 13F portfolio. Sitting at the No. 2 spot is Jeffrey Bronchick’s Cove Street Capital which holds a $16 million position; 1.7% of its 13F portfolio is allocated to the company. Other hedge funds and institutional investors with similar optimism include Jim Simons’ Renaissance Technologies and Mario Gabelli’s GAMCO Investors. 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.

With a general bullishness amongst the heavyweights, specific money managers have jumped into Raven Industries, Inc. (NASDAQ:RAVN) headfirst. Cove Street Capital created the largest position in Raven Industries, Inc. (NASDAQ:RAVN). Millennium Management, which is one of the largest hedge funds in the world, also made a $3.1 million investment in the stock during the quarter. The other funds with brand new RAVN positions are Joel Greenblatt’s Gotham Asset Management, Paul Tudor Jones’ Tudor Investment Corp, and Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital.

Let’s now take a look at hedge fund activity in other stocks similar to Raven Industries, Inc. (NASDAQ:RAVN). We will take a look at TCP Capital Corp (NASDAQ:TCPC), Ambac Financial Group, Inc. (NASDAQ:AMBC), Momenta Pharmaceuticals, Inc. (NASDAQ:MNTA), and Asanko Gold Inc (NYSEAMEX:AKG). This group of stocks’ market values are similar to RAVN’s market value.

As you can see these stocks had an average of 12 hedge funds with bullish positions and the average amount invested in these stocks was $103 million. That figure was $78 million in RAVN’s case. Ambac Financial Group, Inc. (NASDAQ:AMBC) is the most popular stock in this table. On the other hand TCP Capital Corp (NASDAQ:TCPC) is the least popular one with only six bullish hedge fund positions. Raven Industries, Inc. (NASDAQ:RAVN) 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 Ambac Financial Group, Inc. (NASDAQ:AMBC) might be a better candidate to consider taking a long position in.

Disclosure: none