Do Hedge Funds Love Rexnord Corp (RXN)?

Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Rexnord Corp (NYSE:RXN).

Rexnord Corp (NYSE:RXN) investors should be aware of an increase in support from the world’s most elite money managers recently. Rexnord Corp (NYSE:RXN) was in 25 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 27. Our calculations also showed that RXN isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

In the financial world there are a multitude of signals shareholders put to use to assess their holdings. A couple of the most underrated signals are hedge fund and insider trading activity. We have shown that, historically, those who follow the best picks of the best hedge fund managers can outperform the market by a healthy amount (see the details here). Also, our monthly newsletter’s portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .

Jeremy Mindich - Scopia Capital

Jeremy Mindich of Scopia Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, economists warn of inflation flare up. So, we are checking out this backdoor gold play that has hit peak gains of 718% in a little over a year. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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. You can subscribe to our free daily newsletter on our homepage. With all of this in mind we’re going to check out the fresh hedge fund action regarding Rexnord Corp (NYSE:RXN).

Do Hedge Funds Think RXN Is A Good Stock To Buy Now?

At Q1’s end, a total of 25 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 25% from the previous quarter. By comparison, 19 hedge funds held shares or bullish call options in RXN 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.

Among these funds, Impax Asset Management held the most valuable stake in Rexnord Corp (NYSE:RXN), which was worth $176.6 million at the end of the fourth quarter. On the second spot was Balyasny Asset Management which amassed $47.5 million worth of shares. Scopia Capital, Citadel Investment Group, and Point72 Asset Management 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 Scopia Capital allocated the biggest weight to Rexnord Corp (NYSE:RXN), around 5.57% of its 13F portfolio. Impax Asset Management is also relatively very bullish on the stock, designating 0.9 percent of its 13F equity portfolio to RXN.

Now, key money managers were leading the bulls’ herd. Balyasny Asset Management, managed by Dmitry Balyasny, created the most valuable position in Rexnord Corp (NYSE:RXN). Balyasny Asset Management had $47.5 million invested in the company at the end of the quarter. Matt Sirovich and Jeremy Mindich’s Scopia Capital also made a $44.9 million investment in the stock during the quarter. The other funds with brand new RXN positions are Steve Cohen’s Point72 Asset Management, Louis Bacon’s Moore Global Investments, and Gavin Saitowitz and Cisco J. del Valle’s Prelude Capital (previously Springbok Capital).

Let’s also examine hedge fund activity in other stocks similar to Rexnord Corp (NYSE:RXN). These stocks are Adaptive Biotechnologies Corporation (NASDAQ:ADPT), Upwork Inc. (NASDAQ:UPWK), Just Eat N.V. (NASDAQ:GRUB), Air Lease Corp (NYSE:AL), Omnicell, Inc. (NASDAQ:OMCL), South State Corporation (NASDAQ:SSB), and Valley National Bancorp (NASDAQ:VLY). This group of stocks’ market caps resemble RXN’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ADPT 29 2138890 -1
UPWK 32 530996 -2
GRUB 35 1075678 -3
AL 27 917435 3
OMCL 19 73328 -1
SSB 24 252240 7
VLY 17 87726 0
Average 26.1 725185 0.4

View table here if you experience formatting issues.

As you can see these stocks had an average of 26.1 hedge funds with bullish positions and the average amount invested in these stocks was $725 million. That figure was $384 million in RXN’s case. Just Eat N.V. (NASDAQ:GRUB) is the most popular stock in this table. On the other hand Valley National Bancorp (NASDAQ:VLY) is the least popular one with only 17 bullish hedge fund positions. Rexnord Corp (NYSE:RXN) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for RXN is 60. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through July 9th and beat the market by 6.7 percentage points. A small number of hedge funds were also right about betting on RXN, though not to the same extent, as the stock returned 10.9% since the end of Q1 (through July 9th) and outperformed the market.

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