Looking for high-potential stocks? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 5.2% in the 12 months ending October 30, with more than 51% of the stocks in the index failing to beat the benchmark. Therefore, the odds that one will pin down a winner by randomly picking a stock are less than the odds in a fair coin-tossing game. Conversely, hedge funds’ 30 preferred S&P 500 stocks (as of September 2014) generated a return of 9.5% during the same 12-month period, with 63% of these stock picks outperformed the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering a 16-year period indicates that hedge funds’ stock picks generate superior risk-adjusted returns. That’s why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like Republic Airways Holdings Inc. (NASDAQ:RJET).
Hedge fund interest in Republic Airways Holdings Inc. (NASDAQ:RJET) shares was flat at the end of last quarter. This is usually a negative indicator. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Central European Media Enterprises Ltd. (NASDAQ:CETV), Nanometrics Incorporated (NASDAQ:NANO), and Handy and Harman Ltd (NASDAQ:HNH) to gather more data points.
Keeping this in mind, let’s take a glance at the latest action surrounding Republic Airways Holdings Inc. (NASDAQ:RJET).
What does the smart money think about Republic Airways Holdings Inc. (NASDAQ:RJET)?
At Q3’s end, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the second quarter. With the smart money’s capital changing hands, there exists a few key hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Stelliam Investment Management, managed by Ross Margolies, holds the most valuable position in Republic Airways Holdings Inc. (NASDAQ:RJET). Stelliam Investment Management has an $29 million position in the stock, comprising 0.7% of its 13F portfolio. On Stelliam Investment Management’s heels is Christopher Pucillo of Solus Alternative Asset Management, with an $27.2 million position; 4.1% of its 13F portfolio is allocated to the stock. Some other peers that are bullish contain George Soros’ Soros Fund Management, Jeff Buick’s Trishield Capital Management and Richard L. Haydon’s Yield Capital Partners (Y/Cap Management).
Intriguingly, Stephen V. Raneri’s LionEye Capital Management dropped the largest position of all the hedgies monitored by Insider Monkey, comprising an estimated $18.9 million in stock. Louis Bacon’s fund, Moore Global Investments, also said goodbye to its stock, about $3.4 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s go over hedge fund activity in other stocks similar to Republic Airways Holdings Inc. (NASDAQ:RJET). We will take a look at Central European Media Enterprises Ltd. (NASDAQ:CETV), Nanometrics Incorporated (NASDAQ:NANO), Handy and Harman Ltd (NASDAQ:HNH), and AEP Industries (NASDAQ:AEPI). This group of stocks’ market valuations resemble RJET’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 8.25 hedge funds with bullish positions and the average amount invested in these stocks was $100 million. That figure was $83 million in RJET’s case. AEP Industries (NASDAQ:AEPI) is the most popular stock in this table. On the other hand Handy and Harman Ltd (NASDAQ:HNH) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Republic Airways Holdings Inc. (NASDAQ:RJET) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.