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Did Hedge Funds Drop The Ball On RPC, Inc. (RES) ?

Before we spend countless hours researching a company, we’d like to analyze what insiders, hedge funds and billionaire investors think of the stock first. We would like to do so because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of RPC, Inc. (NYSE:RES).

RPC, Inc. (NYSE:RES) shareholders have witnessed a decrease in hedge fund interest in recent months. RES was in 12 hedge funds’ portfolios at the end of December. There were 15 hedge funds in our database with RES positions at the end of the previous quarter. Our calculations also showed that res isn’t among the 30 most popular stocks among hedge funds.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.5% through March 12, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

GOTHAM ASSET MANAGEMENT

Let’s check out the new hedge fund action regarding RPC, Inc. (NYSE:RES).

What have hedge funds been doing with RPC, Inc. (NYSE:RES)?

At Q4’s end, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -20% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards RES over the last 14 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).

No of Hedge Funds with RES Positions

More specifically, AQR Capital Management was the largest shareholder of RPC, Inc. (NYSE:RES), with a stake worth $31.8 million reported as of the end of September. Trailing AQR Capital Management was GAMCO Investors, which amassed a stake valued at $24.5 million. Royce & Associates, Fisher Asset Management, and Gotham Asset Management were also very fond of the stock, giving the stock large weights in their portfolios.

Seeing as RPC, Inc. (NYSE:RES) has faced a decline in interest from hedge fund managers, we can see that there exists a select few money managers who were dropping their positions entirely by the end of the third quarter. At the top of the heap, Charles Paquelet’s Skylands Capital sold off the biggest stake of the “upper crust” of funds followed by Insider Monkey, comprising an estimated $4.5 million in stock, and Israel Englander’s Millennium Management was right behind this move, as the fund sold off about $1.8 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest fell by 3 funds by the end of the third quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as RPC, Inc. (NYSE:RES) but similarly valued. These stocks are ABM Industries, Inc. (NYSE:ABM), CoreCivic, Inc. (NYSE:CXW), Halozyme Therapeutics, Inc. (NASDAQ:HALO), and First Midwest Bancorp Inc (NASDAQ:FMBI). This group of stocks’ market values are similar to RES’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ABM 12 48851 1
CXW 21 143123 8
HALO 16 199336 -5
FMBI 12 64807 4
Average 15.25 114029 2

View table here if you experience formatting issues.

As you can see these stocks had an average of 15.25 hedge funds with bullish positions and the average amount invested in these stocks was $114 million. That figure was $97 million in RES’s case. CoreCivic, Inc. (NYSE:CXW) is the most popular stock in this table. On the other hand ABM Industries, Inc. (NYSE:ABM) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks RPC, Inc. (NYSE:RES) is even less popular than ABM. Hedge funds clearly dropped the ball on RES as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. A small number of hedge funds were also right about betting on RES as the stock returned 30.1% and outperformed the market by an even larger margin.

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

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