Hedge Funds Are Dumping Revlon Inc (REV)

Hedge funds are not perfect. They have their bad picks just like everyone else. Micron, a stock hedge funds have loved, lost 50% during the last 12 months ending in October 30. Although hedge funds are not perfect, their consensus picks do deliver solid returns, however. Our data show the top 30 S&P 500 stocks among hedge funds at the end of September 2014 yielded an average return of 9.5% in the same time period, vs. a gain of 5.2% for the S&P 500 Index. Because hedge funds have a lot of resources and their consensus picks do well, we pay attention to what they think. In this article, we analyze what the elite funds think of Revlon Inc (NYSE:REV).

Revlon Inc (NYSE:REV) has seen a decrease in support from the world’s most elite money managers of late. Revlon Inc (NYSE:REV) was in 9 hedge funds’ portfolios at the end of September. There were 10 hedge funds in our database with Revlon Inc (NYSE:REV) holdings at the end of the previous quarter. It is important to note that the stock lost 19.78% value during the last quarter, facing a bearish market mood. We will cover hedge funds that maintained positions in Revlon Inc (NYSE:REV), at the end of the third quarter.

In order to find out more about the hedge fund sentiment, we will compare Revlon Inc (NYSE:REV) to other stocks, including American States Water Co (NYSE:AWR), Greif, Inc. (NYSE:GEF), and ABM Industries, Inc. (NYSE:ABM) to get a better sense of its popularity.

According to most traders, hedge funds are assumed to be slow, old financial tools of yesteryear. While there are greater than 8000 funds trading today, we choose to focus on the upper echelon of this group, about 700 funds. Most estimates calculate that this group of people administers the lion’s share of all hedge funds’ total asset base, and by keeping track of their first-class picks, Insider Monkey has identified various investment strategies that have historically beaten the market. Insider Monkey’s small-cap hedge fund strategy outrun the S&P 500 index by 12 percentage points per annum for a decade in their back tests.

Now, let’s view the recent action surrounding Revlon Inc (NYSE:REV).

What does the smart money think about Revlon Inc (NYSE:REV)?

At the end of Q3, a total of 9 of the hedge funds tracked by Insider Monkey were long this stock, a decrease of 10% 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 stakes significantly (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Renaissance Technologies has the largest position in Revlon Inc (NYSE:REV), worth close to $6.4 million, accounting for less than 0.1% of its total 13F portfolio. Coming in second is Millennium Management, led by Israel Englander, holding a $1.4 million position; the fund has less than 0.1% of its 13F portfolio invested in the stock. Some other peers with similar optimism comprise Peter Muller’s PDT Partners, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, and Roger Ibbotson’s Zebra Capital Management.

Due to the fact that Revlon Inc (NYSE:REV) has witnessed a falling interest from the aggregate hedge fund industry, it’s easy to see that there is a sect of hedge funds that elected to cut their entire stakes by the end of the third quarter. It’s worth mentioning that Joel Greenblatt’s Gotham Asset Management cut the biggest stake of all the hedgies watched by Insider Monkey, worth about $2 million in stock, and D E Shaw was right behind this move, as the fund dropped about $0.2 million worth of shares. These bearish behaviors are intriguing to say the least, as total hedge fund interest dropped by 1 fund by the end of the third quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Revlon Inc (NYSE:REV) but similarly valued. We will take a look at American States Water Co (NYSE:AWR), Greif, Inc. (NYSE:GEF), ABM Industries, Inc. (NYSE:ABM), and China Lodging Group, Ltd (ADR) (NASDAQ:HTHT). This group of stocks’ market caps are closest to Revlon Inc (NYSE:REV)’s market cap.

As you can see, these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $82 million. That figure was $13 million in Revlon Inc (NYSE:REV)’s case. Greif, Inc. (NYSE:GEF) is the most popular stock in this table. On the other hand, American States Water Co (NYSE:AWR) is the least popular one with only 5 bullish hedge fund positions. Revlon Inc (NYSE:REV) 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. In this regard, Greif, Inc. (NYSE:GEF) might be a better candidate to consider a long position.