Do Hedge Funds Love Revlon Inc (REV)?

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 second 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 5 years and analyze what the smart money thinks of Revlon Inc (NYSE:REV) based on that data and determine whether they were really smart about the stock.

Is Revlon Inc (NYSE:REV) worth your attention right now? Hedge funds were in a pessimistic mood. The number of bullish hedge fund positions decreased by 2 lately. Revlon Inc (NYSE:REV) was in 34 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 38. Our calculations also showed that REV isn’t among the 30 most popular stocks among hedge funds (click for Q2 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.

In the eyes of most investors, hedge funds are assumed to be unimportant, outdated investment vehicles of years past. While there are over 8000 funds with their doors open at present, We hone in on the crème de la crème of this club, approximately 850 funds. Most estimates calculate that this group of people direct most of all hedge funds’ total capital, and by tailing their highest performing investments, Insider Monkey has spotted many investment strategies that have historically exceeded Mr. Market. Insider Monkey’s flagship short hedge fund strategy outstripped the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Richard Pzena - Pzena Investment Management

Richard S. Pzena of Pzena Investment Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, this “mom” trader turned $2000 into $2 million within 2 years. So, we are checking out her best trade idea of the month. Cannabis stocks are roaring back in 2020, which is why we are also checking out this under-the-radar stock. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world 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. Now we’re going to take a glance at the key hedge fund action regarding Revlon Inc (NYSE:REV).

What have hedge funds been doing with Revlon Inc (NYSE:REV)?

Heading into the third quarter of 2020, a total of 34 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -6% from one quarter earlier. By comparison, 31 hedge funds held shares or bullish call options in REV a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is REV A Good Stock To Buy?

Among these funds, SCW Capital Management held the most valuable stake in Revlon Inc (NYSE:REV), which was worth $39.7 million at the end of the third quarter. On the second spot was Sunriver Management which amassed $37.6 million worth of shares. Pzena Investment Management, Sectoral Asset Management, and Royce & Associates 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 SCW Capital Management allocated the biggest weight to Revlon Inc (NYSE:REV), around 25.35% of its 13F portfolio. Litespeed Management is also relatively very bullish on the stock, earmarking 22.57 percent of its 13F equity portfolio to REV.

Judging by the fact that Revlon Inc (NYSE:REV) has faced falling interest from the aggregate hedge fund industry, we can see that there were a few hedgies who were dropping their entire stakes by the end of the second quarter. At the top of the heap, Peter S. Park’s Park West Asset Management dropped the biggest stake of all the hedgies tracked by Insider Monkey, worth about $7.5 million in stock. Vishal Saluja and Pham Quang’s fund, Endurant Capital Management, also dumped its stock, about $4.4 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest fell by 2 funds by the end of the second quarter.

Let’s check out hedge fund activity in other stocks similar to Revlon Inc (NYSE:REV). We will take a look at Ranpak Holdings Corp (NYSE:PACK), Controladora Vuela Co Avcn SA CV (NYSE:VLRS), ADTRAN, Inc. (NASDAQ:ADTN), CBTX, Inc. (NASDAQ:CBTX), NexTier Oilfield Solutions Inc. (NYSE:NEX), Viking Therapeutics, Inc. (NASDAQ:VKTX), and 111, Inc. (NASDAQ:YI). This group of stocks’ market valuations resemble REV’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PACK 14 288373 0
VLRS 9 55373 0
ADTN 17 71112 1
CBTX 8 9595 -2
NEX 24 178237 3
VKTX 17 35268 0
YI 4 8031 1
Average 13.3 92284 0.4

View table here if you experience formatting issues.

As you can see these stocks had an average of 13.3 hedge funds with bullish positions and the average amount invested in these stocks was $92 million. That figure was $242 million in REV’s case. NexTier Oilfield Solutions Inc. (NYSE:NEX) is the most popular stock in this table. On the other hand 111, Inc. (NASDAQ:YI) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Revlon Inc (NYSE:REV) is more popular among hedge funds. Our overall hedge fund sentiment score for REV is 79.8. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 33% in 2020 through the end of August and still beat the market by 23.2 percentage points. Unfortunately REV wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on REV were disappointed as the stock returned -26.1% since the end of 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.