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Hedge Funds Are Buying Robert Half International Inc. (RHI)

At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Robert Half International Inc. (NYSE:RHI).

Is Robert Half International Inc. (NYSE:RHI) a healthy stock for your portfolio? Money managers are in a bullish mood. The number of long hedge fund positions moved up by 3 in recent months. Our calculations also showed that RHI 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). RHI was in 26 hedge funds’ portfolios at the end of March. There were 23 hedge funds in our database with RHI positions at the end of the previous quarter.

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 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 58 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.

Richard Pzena - Pzena Investment Management

Richard S. Pzena of Pzena Investment ManagementRichard S. Pzena

We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like these. 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 take a gander at the fresh hedge fund action encompassing Robert Half International Inc. (NYSE:RHI).

Hedge fund activity in Robert Half International Inc. (NYSE:RHI)

At the end of the first quarter, a total of 26 of the hedge funds tracked by Insider Monkey were long this stock, a change of 13% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards RHI over the last 18 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to Insider Monkey’s hedge fund database, AQR Capital Management, managed by Cliff Asness, holds the number one position in Robert Half International Inc. (NYSE:RHI). AQR Capital Management has a $175.5 million position in the stock, comprising 0.3% of its 13F portfolio. Sitting at the No. 2 spot is Renaissance Technologies, holding a $18.8 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other peers that hold long positions include Chuck Royce’s Royce & Associates, Ken Griffin’s Citadel Investment Group and Joel Greenblatt’s Gotham Asset Management. In terms of the portfolio weights assigned to each position AQR Capital Management allocated the biggest weight to Robert Half International Inc. (NYSE:RHI), around 0.3% of its 13F portfolio. Quantinno Capital is also relatively very bullish on the stock, setting aside 0.21 percent of its 13F equity portfolio to RHI.

As one would reasonably expect, key hedge funds have jumped into Robert Half International Inc. (NYSE:RHI) headfirst. Carlson Capital, managed by Clint Carlson, created the most valuable position in Robert Half International Inc. (NYSE:RHI). Carlson Capital had $4.9 million invested in the company at the end of the quarter. Donald Sussman’s Paloma Partners also made a $0.9 million investment in the stock during the quarter. The other funds with new positions in the stock are Richard S. Pzena’s Pzena Investment Management, Greg Eisner’s Engineers Gate Manager, and Peter Algert and Kevin Coldiron’s Algert Coldiron Investors.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Robert Half International Inc. (NYSE:RHI) but similarly valued. We will take a look at Flowers Foods, Inc. (NYSE:FLO), National Instruments Corporation (NASDAQ:NATI), MDU Resources Group Inc (NYSE:MDU), and Science Applications International Corp (NYSE:SAIC). This group of stocks’ market values are similar to RHI’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
FLO 27 227639 7
NATI 29 706256 -1
MDU 25 183156 -5
SAIC 34 371964 7
Average 28.75 372254 2

View table here if you experience formatting issues.

As you can see these stocks had an average of 28.75 hedge funds with bullish positions and the average amount invested in these stocks was $372 million. That figure was $247 million in RHI’s case. Science Applications International Corp (NYSE:SAIC) is the most popular stock in this table. On the other hand MDU Resources Group Inc (NYSE:MDU) is the least popular one with only 25 bullish hedge fund positions. Robert Half International Inc. (NYSE:RHI) is not the least popular stock in this group but hedge fund interest is still below average. 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 still beat the market by 13.2 percentage points. A small number of hedge funds were also right about betting on RHI as the stock returned 35.4% during the second quarter and outperformed the market by an even larger margin.

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