The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. We are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article we look at how hedge funds traded Ryder System, Inc. (NYSE:R) and determine whether the smart money was really smart about this stock.
Is Ryder System, Inc. (NYSE:R) a buy right now? Hedge funds were getting less bullish. The number of bullish hedge fund bets fell by 5 in recent months. Our calculations also showed that R isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). R was in 18 hedge funds’ portfolios at the end of the first quarter of 2020. There were 23 hedge funds in our database with R holdings at the end of the previous quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. Cannabis stocks are roaring back in 2020, so we are checking out this under-the-radar stock. We go through lists like the 10 most profitable companies in America to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Now we’re going to take a gander at the recent hedge fund action encompassing Ryder System, Inc. (NYSE:R).
Hedge fund activity in Ryder System, Inc. (NYSE:R)
At Q1’s end, a total of 18 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -22% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in R over the last 18 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Pzena Investment Management held the most valuable stake in Ryder System, Inc. (NYSE:R), which was worth $95.7 million at the end of the third quarter. On the second spot was Arrowstreet Capital which amassed $28 million worth of shares. Luminus Management, Two Sigma Advisors, and Citadel Investment Group were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Trellus Management Company allocated the biggest weight to Ryder System, Inc. (NYSE:R), around 1.19% of its 13F portfolio. Luminus Management is also relatively very bullish on the stock, dishing out 1.08 percent of its 13F equity portfolio to R.
Judging by the fact that Ryder System, Inc. (NYSE:R) has experienced declining sentiment from hedge fund managers, logic holds that there exists a select few hedgies who were dropping their positions entirely heading into Q4. Intriguingly, Alexander Mitchell’s Scopus Asset Management said goodbye to the largest investment of all the hedgies watched by Insider Monkey, worth an estimated $31 million in stock. Dmitry Balyasny’s fund, Balyasny Asset Management, also dumped its stock, about $27.4 million worth. These transactions are important to note, as total hedge fund interest was cut by 5 funds heading into Q4.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Ryder System, Inc. (NYSE:R) but similarly valued. We will take a look at Mack Cali Realty Corp (NYSE:CLI), Meritage Homes Corp (NYSE:MTH), Hilltop Holdings Inc. (NYSE:HTH), and SailPoint Technologies Holdings, Inc. (NYSE:SAIL). This group of stocks’ market valuations resemble R’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $123 million. That figure was $158 million in R’s case. Meritage Homes Corp (NYSE:MTH) is the most popular stock in this table. On the other hand Mack Cali Realty Corp (NYSE:CLI) is the least popular one with only 10 bullish hedge fund positions. Ryder System, Inc. (NYSE:R) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 18.6% in 2020 through July 27th but still beat the market by 17.1 percentage points. Hedge funds were also right about betting on R as the stock returned 65.7% since Q1 and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.