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Hedge Funds Are Dumping Rayonier Advanced Materials Inc (RYAM)

Amid an overall market correction, many stocks that smart money investors were collectively bullish on tanked during the fourth quarter. Among them, Amazon and Netflix ranked among the top 30 picks and both lost around 20%. Facebook, which was the second most popular stock, lost 14% amid uncertainty regarding the interest rates and tech valuations. Nevertheless, our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.

Rayonier Advanced Materials Inc (NYSE:RYAM) has experienced a decrease in enthusiasm from smart money lately. Our calculations also showed that RYAM isn’t among the 30 most popular stocks among hedge funds.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 6.3% year to date (through December 3rd) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 18 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

RENAISSANCE TECHNOLOGIES

Let’s analyze the key hedge fund action surrounding Rayonier Advanced Materials Inc (NYSE:RYAM).

How have hedgies been trading Rayonier Advanced Materials Inc (NYSE:RYAM)?

Heading into the fourth quarter of 2018, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -8% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards RYAM over the last 13 quarters. With hedgies’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).

RYAM_dec2018

Among these funds, Renaissance Technologies held the most valuable stake in Rayonier Advanced Materials Inc (NYSE:RYAM), which was worth $75.8 million at the end of the third quarter. On the second spot was Marcato Capital Management which amassed $42 million worth of shares. Moreover, Ancora Advisors, Rubric Capital Management, and Rubric Capital Management were also bullish on Rayonier Advanced Materials Inc (NYSE:RYAM), allocating a large percentage of their portfolios to this stock.

Seeing as Rayonier Advanced Materials Inc (NYSE:RYAM) has faced falling interest from the smart money, we can see that there is a sect of fund managers that slashed their entire stakes last quarter. It’s worth mentioning that Howard Marks’s Oaktree Capital Management dropped the largest investment of the 700 funds tracked by Insider Monkey, comprising about $17.1 million in stock, and Phill Gross and Robert Atchinson’s Adage Capital Management was right behind this move, as the fund cut about $14.9 million worth. These transactions are interesting, as aggregate hedge fund interest was cut by 2 funds last quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Rayonier Advanced Materials Inc (NYSE:RYAM) but similarly valued. These stocks are CIRCOR International, Inc. (NYSE:CIR), Dicerna Pharmaceuticals Inc (NASDAQ:DRNA), Casa Therapeutics Inc (NASDAQ:CARA), and CoBiz Financial Inc (NASDAQ:COBZ). All of these stocks’ market caps are closest to RYAM’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CIR 5 208487 -3
DRNA 20 382114 4
CARA 11 45623 6
COBZ 14 118675 -4
Average 12.5 188725 0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 12.5 hedge funds with bullish positions and the average amount invested in these stocks was $189 million. That figure was $178 million in RYAM’s case. Dicerna Pharmaceuticals Inc (NASDAQ:DRNA) is the most popular stock in this table. On the other hand CIRCOR International, Inc. (NYSE:CIR) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Rayonier Advanced Materials Inc (NYSE:RYAM) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.

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

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