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Did Hedge Funds Drop The Ball On Ryder System, Inc. (R)?

After several tireless days we have finished crunching the numbers from nearly 750 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms’ equity portfolios as of December 31. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards Ryder System, Inc. (NYSE:R).

Is Ryder System, Inc. (NYSE:R) a buy, sell, or hold? Money managers are getting less bullish. The number of bullish hedge fund bets decreased by 4 lately. Our calculations also showed that r isn’t among the 30 most popular stocks among hedge funds.

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 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 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 our short portfolio.

John Overdeck of Two Sigma

We’re going to review the fresh hedge fund action regarding Ryder System, Inc. (NYSE:R).

How are hedge funds trading Ryder System, Inc. (NYSE:R)?

At the end of the fourth quarter, a total of 19 of the hedge funds tracked by Insider Monkey were long this stock, a change of -17% from the previous quarter. On the other hand, there were a total of 18 hedge funds with a bullish position in R a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).

No of Hedge Funds with R Positions

More specifically, Pzena Investment Management was the largest shareholder of Ryder System, Inc. (NYSE:R), with a stake worth $128.6 million reported as of the end of September. Trailing Pzena Investment Management was Luminus Management, which amassed a stake valued at $98.7 million. AQR Capital Management, Carlson Capital, and Two Sigma Advisors were also very fond of the stock, giving the stock large weights in their portfolios.

Judging by the fact that Ryder System, Inc. (NYSE:R) has experienced declining sentiment from the smart money, it’s safe to say that there lies a certain “tier” of hedge funds that elected to cut their entire stakes by the end of the third quarter. At the top of the heap, Ken Grossman and Glen Schneider’s SG Capital Management dumped the biggest position of all the hedgies watched by Insider Monkey, totaling about $15.8 million in stock, and Gregg Moskowitz’s Interval Partners was right behind this move, as the fund dumped about $7.3 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest fell by 4 funds by the end of the third quarter.

Let’s also examine 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 NuVasive, Inc. (NASDAQ:NUVA), RH (NYSE:RH), WD-40 Company (NASDAQ:WDFC), and Finisar Corporation (NASDAQ:FNSR). This group of stocks’ market values match R’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NUVA 20 207882 -2
RH 28 220843 0
WDFC 15 169856 5
FNSR 13 322901 0
Average 19 230371 0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $230 million. That figure was $373 million in R’s case. RH (NYSE:RH) is the most popular stock in this table. On the other hand Finisar Corporation (NASDAQ:FNSR) is the least popular one with only 13 bullish hedge fund positions. Ryder System, Inc. (NYSE:R) is not the least popular stock in this group but hedge fund interest is still below average. 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 R as the stock returned 37.7% and outperformed the market by an even larger margin.

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

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