Hedge Funds Are Dumping Regions Financial Corporation (RF)

“Since 2006, value stocks (IVE vs IVW) have underperformed 11 of the 13 calendar years and when they beat growth, it wasn’t by much. Cumulatively, through this week, it has been a 122% differential (up 52% for value vs up 174% for growth). This appears to be the longest and most severe drought for value investors since data collection began. It will go our way eventually as there are too many people paying far too much for today’s darlings, both public and private. Further, the ten-year yield of 2.5% (pre-tax) isn’t attractive nor is real estate. We believe the value part of the global equity market is the only place to earn solid risk adjusted returns and we believe those returns will be higher than normal,” said Vilas Fund in its Q1 investor letter. We aren’t sure whether value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. That’s why we believe it would be worthwhile to take a look at the hedge fund sentiment on Regions Financial Corporation (NYSE:RF) in order to identify whether reputable and successful top money managers continue to believe in its potential.

Is Regions Financial Corporation (NYSE:RF) worth your attention right now? Money managers are in a pessimistic mood. The number of bullish hedge fund bets retreated by 9 recently. Our calculations also showed that RF isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). RF was in 23 hedge funds’ portfolios at the end of the third quarter of 2019. There were 32 hedge funds in our database with RF positions at the end of the previous quarter.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

Today there are numerous gauges shareholders use to assess publicly traded companies. Two of the less utilized gauges are hedge fund and insider trading signals. We have shown that, historically, those who follow the best picks of the best money managers can trounce the market by a healthy margin (see the details here).

Phill Gross of Adage Capital Management

Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. Let’s review the key hedge fund action surrounding Regions Financial Corporation (NYSE:RF).

Hedge fund activity in Regions Financial Corporation (NYSE:RF)

At the end of the third quarter, a total of 23 of the hedge funds tracked by Insider Monkey were long this stock, a change of -28% from the second quarter of 2019. On the other hand, there were a total of 31 hedge funds with a bullish position in RF 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.

The largest stake in Regions Financial Corporation (NYSE:RF) was held by Citadel Investment Group, which reported holding $92.8 million worth of stock at the end of September. It was followed by Two Sigma Advisors with a $85.7 million position. Other investors bullish on the company included Pzena Investment Management, Arrowstreet Capital, and Millennium Management. In terms of the portfolio weights assigned to each position Forest Hill Capital allocated the biggest weight to Regions Financial Corporation (NYSE:RF), around 2.42% of its 13F portfolio. Interval Partners is also relatively very bullish on the stock, designating 1.06 percent of its 13F equity portfolio to RF.

Due to the fact that Regions Financial Corporation (NYSE:RF) has faced bearish sentiment from hedge fund managers, we can see that there is a sect of funds that elected to cut their positions entirely heading into Q4. Interestingly, Ravi Chopra’s Azora Capital dropped the biggest stake of the “upper crust” of funds followed by Insider Monkey, comprising an estimated $25.6 million in stock. Daniel Johnson’s fund, Gillson Capital, also sold off its stock, about $20.1 million worth. These bearish behaviors are important to note, as total hedge fund interest fell by 9 funds heading into Q4.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Regions Financial Corporation (NYSE:RF) but similarly valued. We will take a look at Amcor plc (NYSE:AMCR), Teleflex Incorporated (NYSE:TFX), Maxim Integrated Products Inc. (NASDAQ:MXIM), and Evergy, Inc. (NYSE:EVRG). All of these stocks’ market caps are similar to RF’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AMCR 16 131192 4
TFX 26 767534 1
MXIM 29 249444 1
EVRG 25 866687 0
Average 24 503714 1.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 24 hedge funds with bullish positions and the average amount invested in these stocks was $504 million. That figure was $503 million in RF’s case. Maxim Integrated Products Inc. (NASDAQ:MXIM) is the most popular stock in this table. On the other hand Amcor plc (NYSE:AMCR) is the least popular one with only 16 bullish hedge fund positions. Regions Financial Corporation (NYSE:RF) 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 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately RF wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); RF investors were disappointed as the stock returned 5.2% during the first two months of the fourth 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 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market in Q4.

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