Did Hedge Funds Make The Right Call On Range Resources Corp. (RRC) ?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Range Resources Corp. (NYSE:RRC) based on that data and determine whether they were really smart about the stock.

Range Resources Corp. (NYSE:RRC) has experienced a decrease in enthusiasm from smart money in recent months. Our calculations also showed that RRC 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).

Video: Watch our video about the top 5 most popular hedge fund stocks.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Phill Gross of Adage Capital Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, on one site we found out that NBA champion Isiah Thomas is now the CEO of this cannabis company. The same site also talks about a snack manufacturer that’s growing at 30% annually. 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. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so if you have any good ideas send us an email. Keeping this in mind let’s take a peek at the latest hedge fund action surrounding Range Resources Corp. (NYSE:RRC).

How are hedge funds trading Range Resources Corp. (NYSE:RRC)?

At the end of the first quarter, a total of 23 of the hedge funds tracked by Insider Monkey were long this stock, a change of -21% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards RRC over the last 18 quarters. With the smart money’s capital changing hands, there exists a select group of key hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).

The largest stake in Range Resources Corp. (NYSE:RRC) was held by SailingStone Capital Partners, which reported holding $70.8 million worth of stock at the end of September. It was followed by Kopernik Global Investors with a $28.4 million position. Other investors bullish on the company included Contrarius Investment Management, Adage Capital Management, and Fisher Asset Management. In terms of the portfolio weights assigned to each position SailingStone Capital Partners allocated the biggest weight to Range Resources Corp. (NYSE:RRC), around 39.67% of its 13F portfolio. Kopernik Global Investors is also relatively very bullish on the stock, setting aside 6.05 percent of its 13F equity portfolio to RRC.

Since Range Resources Corp. (NYSE:RRC) has experienced declining sentiment from hedge fund managers, we can see that there were a few funds that decided to sell off their positions entirely by the end of the first quarter. Interestingly, Robert Pitts’s Steadfast Capital Management cut the largest investment of all the hedgies monitored by Insider Monkey, comprising close to $9.5 million in stock. Steve Cohen’s fund, Point72 Asset Management, also dropped its stock, about $5.4 million worth. These transactions are interesting, as aggregate hedge fund interest dropped by 6 funds by the end of the first quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Range Resources Corp. (NYSE:RRC) but similarly valued. We will take a look at Revlon Inc (NYSE:REV), Kforce Inc. (NASDAQ:KFRC), Petmed Express Inc (NASDAQ:PETS), and Redwood Trust, Inc. (NYSE:RWT). This group of stocks’ market values match RRC’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
REV 36 178239 -2
KFRC 15 46137 -7
PETS 18 112993 -1
RWT 22 66955 9
Average 22.75 101081 -0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 22.75 hedge funds with bullish positions and the average amount invested in these stocks was $101 million. That figure was $154 million in RRC’s case. Revlon Inc (NYSE:REV) is the most popular stock in this table. On the other hand Kforce Inc. (NASDAQ:KFRC) is the least popular one with only 15 bullish hedge fund positions. Range Resources Corp. (NYSE:RRC) 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 12.3% in 2020 through June 30th but still beat the market by 15.5 percentage points. Hedge funds were also right about betting on RRC as the stock returned 146.9% in Q2 and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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