Is Royal Bank of Scotland Group plc (ADR) (NYSE:RBS) undervalued? Money managers are in an optimistic mood. The number of bullish hedge fund positions advanced by 2 recently.
According to most shareholders, hedge funds are perceived as unimportant, old financial tools of yesteryear. While there are more than 8000 funds in operation today, we at Insider Monkey choose to focus on the aristocrats of this club, around 450 funds. It is widely believed that this group has its hands on the lion’s share of all hedge funds’ total asset base, and by monitoring their best investments, we have uncovered a few investment strategies that have historically outpaced the S&P 500 index. Our small-cap hedge fund strategy outperformed the S&P 500 index by 18 percentage points annually for a decade in our back tests, and since we’ve started sharing our picks with our subscribers at the end of August 2012, we have trumped the S&P 500 index by 23.3 percentage points in 8 months (see the details here).
Just as key, optimistic insider trading sentiment is a second way to break down the stock market universe. Obviously, there are a variety of motivations for an executive to drop shares of his or her company, but only one, very simple reason why they would behave bullishly. Various academic studies have demonstrated the valuable potential of this method if shareholders know where to look (learn more here).
Keeping this in mind, we’re going to take a glance at the recent action regarding Royal Bank of Scotland Group plc (ADR) (NYSE:RBS).
What does the smart money think about Royal Bank of Scotland Group plc (ADR) (NYSE:RBS)?
At Q1’s end, a total of 14 of the hedge funds we track were bullish in this stock, a change of 17% from one quarter earlier. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were increasing their holdings meaningfully.
When looking at the hedgies we track, Vertex One Asset Management, managed by John Thiessen, holds the largest position in Royal Bank of Scotland Group plc (ADR) (NYSE:RBS). Vertex One Asset Management has a $46.3 million position in the stock, comprising 6.4% of its 13F portfolio. On Vertex One Asset Management’s heels is Xerion, managed by Daniel Arbess, which held a $34 million position; the fund has 2% of its 13F portfolio invested in the stock. Other peers that are bullish include John Thiessen’s Vertex One Asset Management, John Paulson’s Paulson & Co and John Paulson’s Paulson & Co.
As aggregate interest increased, specific money managers have been driving this bullishness. Millennium Management, managed by Israel Englander, created the most valuable position in Royal Bank of Scotland Group plc (ADR) (NYSE:RBS). Millennium Management had 3.6 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also initiated a $2.6 million position during the quarter. The other funds with new positions in the stock are Jim Simons’s Renaissance Technologies, Jim Simons’s Renaissance Technologies, and Israel Englander’s Millennium Management.
How are insiders trading Royal Bank of Scotland Group plc (ADR) (NYSE:RBS)?
Bullish insider trading is most useful when the company we’re looking at has experienced transactions within the past six months. Over the last 180-day time frame, Royal Bank of Scotland Group plc (ADR) (NYSE:RBS) has seen zero unique insiders purchasing, and zero insider sales (see the details of insider trades here).
Let’s also review hedge fund and insider activity in other stocks similar to Royal Bank of Scotland Group plc (ADR) (NYSE:RBS). These stocks are Banco Santander, S.A. (ADR) (NYSE:SAN), Credit Suisse Group AG (ADR) (NYSE:CS), UBS AG (USA) (NYSE:UBS), Barclays PLC (ADR) (NYSE:BCS), and Lloyds Banking Group PLC (ADR) (NYSE:LYG). All of these stocks are in the foreign money center banks industry and their market caps resemble RBS’s market cap.