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Hedge Funds Are Betting On Republic Services, Inc. (RSG)

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. In this article we look at what those investors think of Republic Services, Inc. (NYSE:RSG).

Republic Services, Inc. (NYSE:RSG) investors should be aware of an increase in activity from the world’s largest hedge funds of late. RSG was in 32 hedge funds’ portfolios at the end of the first quarter of 2020. There were 26 hedge funds in our database with RSG positions at the end of the previous quarter. Our calculations also showed that RSG 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 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’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.

CHILTON INVESTMENT COMPANY

Richard Chilton of Chilton Investment Company

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 let’s go over the new hedge fund action encompassing Republic Services, Inc. (NYSE:RSG).

What have hedge funds been doing with Republic Services, Inc. (NYSE:RSG)?

Heading into the second quarter of 2020, a total of 32 of the hedge funds tracked by Insider Monkey were long this stock, a change of 23% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in RSG over the last 18 quarters. With hedgies’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).

The largest stake in Republic Services, Inc. (NYSE:RSG) was held by AQR Capital Management, which reported holding $161.2 million worth of stock at the end of September. It was followed by GAMCO Investors with a $103.5 million position. Other investors bullish on the company included Renaissance Technologies, Citadel Investment Group, and Chilton Investment Company. In terms of the portfolio weights assigned to each position Chilton Investment Company allocated the biggest weight to Republic Services, Inc. (NYSE:RSG), around 3.17% of its 13F portfolio. Wallace Capital Management is also relatively very bullish on the stock, setting aside 1.91 percent of its 13F equity portfolio to RSG.

As aggregate interest increased, specific money managers were breaking ground themselves. Millennium Management, managed by Israel Englander, initiated the biggest position in Republic Services, Inc. (NYSE:RSG). Millennium Management had $16.6 million invested in the company at the end of the quarter. Greg Eisner’s Engineers Gate Manager also initiated a $3.7 million position during the quarter. The other funds with brand new RSG positions are Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Richard SchimeláandáLawrence Sapanski’s Cinctive Capital Management, and Phill Gross and Robert Atchinson’s Adage Capital Management.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Republic Services, Inc. (NYSE:RSG) but similarly valued. These stocks are IHS Markit Ltd. (NYSE:INFO), eBay Inc (NASDAQ:EBAY), Telefonica S.A. (NYSE:TEF), and The Kroger Co. (NYSE:KR). This group of stocks’ market valuations are similar to RSG’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
INFO 44 1159316 15
EBAY 52 3096036 1
TEF 7 16531 -2
KR 43 1581591 12
Average 36.5 1463369 6.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 36.5 hedge funds with bullish positions and the average amount invested in these stocks was $1463 million. That figure was $709 million in RSG’s case. eBay Inc (NASDAQ:EBAY) is the most popular stock in this table. On the other hand Telefonica S.A. (NYSE:TEF) is the least popular one with only 7 bullish hedge fund positions. Republic Services, Inc. (NYSE:RSG) 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 RSG wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); RSG investors were disappointed as the stock returned 13.9% 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.