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Do Hedge Funds Love Raymond James Financial, Inc. (RJF)?

We at Insider Monkey have gone over 821 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, near the height of the coronavirus market crash. In this article, we look at what those funds think of Raymond James Financial, Inc. (NYSE:RJF) based on that data.

Raymond James Financial, Inc. (NYSE:RJF) shareholders have witnessed an increase in enthusiasm from smart money recently. Our calculations also showed that RJF 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.

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 51 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.

Glenn Greenberg

Glenn Greenberg of Brave Warrior Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to go over the key hedge fund action regarding Raymond James Financial, Inc. (NYSE:RJF).

What does smart money think about Raymond James Financial, Inc. (NYSE:RJF)?

Heading into the second quarter of 2020, a total of 31 of the hedge funds tracked by Insider Monkey were long this stock, a change of 11% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in RJF over the last 18 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Brave Warrior Capital, managed by Glenn Greenberg, holds the largest position in Raymond James Financial, Inc. (NYSE:RJF). Brave Warrior Capital has a $141 million position in the stock, comprising 8.1% of its 13F portfolio. The second largest stake is held by Ricky Sandler of Eminence Capital, with a $126.6 million position; the fund has 1.4% of its 13F portfolio invested in the stock. Remaining professional money managers that are bullish include Ken Fisher’s Fisher Asset Management, Steven Richman’s East Side Capital (RR Partners) and Andrew Kurita’s Kettle Hill Capital Management. In terms of the portfolio weights assigned to each position Brave Warrior Capital allocated the biggest weight to Raymond James Financial, Inc. (NYSE:RJF), around 8.12% of its 13F portfolio. East Side Capital (RR Partners) is also relatively very bullish on the stock, setting aside 6.82 percent of its 13F equity portfolio to RJF.

As industrywide interest jumped, key money managers have been driving this bullishness. Kettle Hill Capital Management, managed by Andrew Kurita, created the most valuable position in Raymond James Financial, Inc. (NYSE:RJF). Kettle Hill Capital Management had $10.2 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also initiated a $10 million position during the quarter. The other funds with new positions in the stock are Ben Gordon’s Blue Grotto Capital, John Overdeck and David Siegel’s Two Sigma Advisors, and D. E. Shaw’s D E Shaw.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Raymond James Financial, Inc. (NYSE:RJF) but similarly valued. These stocks are The Trade Desk, Inc. (NASDAQ:TTD), Celanese Corporation (NYSE:CE), Black Knight, Inc. (NYSE:BKI), and Cypress Semiconductor Corporation (NASDAQ:CY). This group of stocks’ market valuations are closest to RJF’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TTD 25 393525 1
CE 29 509076 -2
BKI 32 372352 1
CY 46 2083415 10
Average 33 839592 2.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 33 hedge funds with bullish positions and the average amount invested in these stocks was $840 million. That figure was $441 million in RJF’s case. Cypress Semiconductor Corporation (NASDAQ:CY) is the most popular stock in this table. On the other hand The Trade Desk, Inc. (NASDAQ:TTD) is the least popular one with only 25 bullish hedge fund positions. Raymond James Financial, Inc. (NYSE:RJF) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 8.3% in 2020 through the end of May and surpassed the market by 13.2 percentage points. Unfortunately RJF wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); RJF investors were disappointed as the stock returned 9.6% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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