Hedge Funds Are Piling On This Stock

Amid an overall market correction, many stocks that smart money investors were collectively bullish on tanked during the third quarter. Among them, Valeant and Micron ranked among the top 30 picks and both lost around 20%. Citigroup, which was the third most popular stock, lost 10% amid uncertainty regarding the interest rates. 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.

Raymond James Financial, Inc. (NYSE:RJF) was in 20 hedge funds’ portfolio at the end of the third quarter of 2015. RJF has seen a sharp increase in enthusiasm from smart money in recent months. There were 15 hedge funds in our database with RJF holdings at the end of the previous quarter. The increase is eye catching because hedge funds, on average, were cutting down their positions and reducing their net exposure during the quarter. At the end of this article we will also compare RJF to other stocks including Mattel, Inc. (NASDAQ:MAT), FMC Technologies, Inc. (NYSE:FTI), and Splunk Inc (NASDAQ:SPLK) to get a better sense of its popularity.

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In the financial world there are a lot of methods stock traders can use to evaluate stocks. A duo of the most innovative methods are hedge fund and insider trading activity. Our research have shown that, historically, those who follow the top picks of the best fund managers can trounce the S&P 500 by a solid margin (see the details here).

Keeping this in mind, let’s take a look at the new action encompassing Raymond James Financial, Inc. (NYSE:RJF).

How are hedge funds trading Raymond James Financial, Inc. (NYSE:RJF)?

Heading into Q4, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 33% from the previous quarter. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were increasing their holdings considerably.

When looking at the hedge funds in our database, Citadel Investment Group, managed by Ken Griffin, holds the most valuable position in Raymond James Financial, Inc. (NYSE:RJF). Citadel Investment Group has a $104.9 million position in the stock, comprising 0.1% of its 13F portfolio. The second largest stake is held by Ken Fisher of Fisher Asset Management, with a $77.8 million position; 0.2% of its 13F portfolio is allocated to the company. Some other hedgies that are bullish contain Ross Margolies’s Stelliam Investment Management, Gregg J. Powers’s Private Capital Management and Chuck Royce’s Royce & Associates.

As one would reasonably expect, specific money managers have been driving this bullishness. Stelliam Investment Management, managed by Ross Margolies, established the biggest position in Raymond James Financial, Inc. (NYSE:RJF). Stelliam Investment Management had $50.4 million invested in the company at the end of the quarter. Quant hedge fund Renaissance Technologies also made a $14.9 million investment in the stock during the quarter. The following funds were also among the new RJF investors: Israel Englander’s Millennium Management, George Hall’s Clinton Group, and Ray Dalio’s Bridgewater Associates.

Let’s go over hedge fund activity in other stocks similar to Raymond James Financial, Inc. (NYSE:RJF). We will take a look at Mattel, Inc. (NASDAQ:MAT), FMC Technologies, Inc. (NYSE:FTI), Splunk Inc (NASDAQ:SPLK), and Pinnacle West Capital Corporation (NYSE:PNW). This group of stocks’ market values resemble RJF’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MAT 18 456235 -5
FTI 32 1222817 -5
SPLK 23 396305 0
PNW 18 424386 -6

As you can see these stocks had an average of 22.75 hedge funds with bullish positions and the average amount invested in these stocks was $625 million. FMC Technologies, Inc. (NYSE:FTI) is the most popular stock in this table. On the other hand Mattel, Inc. (NASDAQ:MAT) is the least popular one with only 18 bullish hedge fund positions. Raymond James Financial, Inc. (NYSE:RJF) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal. So, overall, hedge funds started piling on RJF during the quarter but, apparently, it was a highly unpopular stock and the large increase in hedge fund interest wasn’t enough to bring the stock on par with similarly valued stocks. We need to see more hedge funds buying the stock before adding RJF to our portfolio.