Hedge Funds Are Souring On Reliance Steel & Aluminum Co. (RS)

With the third-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the fourth quarter of 2021. One of these stocks was Reliance Steel & Aluminum Co. (NYSE:RS).

Is Reliance Steel & Aluminum Co. (NYSE:RS) a marvelous investment today? Prominent investors were becoming less confident. The number of bullish hedge fund positions went down by 3 lately. Reliance Steel & Aluminum Co. (NYSE:RS) was in 24 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 34. Our calculations also showed that RS isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

Donald Sussman Paloma Partners

Donald Sussman of Paloma Partners

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Now let’s take a look at the recent hedge fund action regarding Reliance Steel & Aluminum Co. (NYSE:RS).

Do Hedge Funds Think RS Is A Good Stock To Buy Now?

Heading into the fourth quarter of 2021, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -11% from the previous quarter. On the other hand, there were a total of 30 hedge funds with a bullish position in RS a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is RS A Good Stock To Buy?

Of the funds tracked by Insider Monkey, AQR Capital Management, managed by Cliff Asness, holds the most valuable position in Reliance Steel & Aluminum Co. (NYSE:RS). AQR Capital Management has a $55.2 million position in the stock, comprising 0.1% of its 13F portfolio. Coming in second is Scopus Asset Management, led by Alexander Mitchell, holding a $55 million position; 0.9% of its 13F portfolio is allocated to the stock. Other professional money managers with similar optimism consist of Chuck Royce’s Royce & Associates, Noam Gottesman’s GLG Partners and Brandon Haley’s Holocene Advisors. In terms of the portfolio weights assigned to each position Lodge Hill Capital allocated the biggest weight to Reliance Steel & Aluminum Co. (NYSE:RS), around 8.12% of its 13F portfolio. Scopus Asset Management is also relatively very bullish on the stock, designating 0.93 percent of its 13F equity portfolio to RS.

Due to the fact that Reliance Steel & Aluminum Co. (NYSE:RS) has witnessed bearish sentiment from the aggregate hedge fund industry, logic holds that there exists a select few hedge funds who were dropping their full holdings last quarter. At the top of the heap, Donald Sussman’s Paloma Partners said goodbye to the biggest investment of all the hedgies tracked by Insider Monkey, worth about $2.4 million in stock, and Paul Tudor Jones’s Tudor Investment Corp was right behind this move, as the fund dumped about $1.7 million worth. These moves are important to note, as aggregate hedge fund interest dropped by 3 funds last quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Reliance Steel & Aluminum Co. (NYSE:RS) but similarly valued. These stocks are GXO Logistics Inc. (NYSE:GXO), Crocs, Inc. (NASDAQ:CROX), First Horizon National Corporation (NYSE:FHN), Juniper Networks, Inc. (NYSE:JNPR), Oatly Group AB (NASDAQ:OTLY), Dolby Laboratories, Inc. (NYSE:DLB), and Genpact Limited (NYSE:G). This group of stocks’ market valuations resemble RS’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
GXO 27 1313274 27
CROX 37 1051423 -3
FHN 24 103547 -3
JNPR 26 288397 -1
OTLY 13 136864 -6
DLB 33 521159 2
G 24 299354 2
Average 26.3 530574 2.6

View table here if you experience formatting issues.

As you can see these stocks had an average of 26.3 hedge funds with bullish positions and the average amount invested in these stocks was $531 million. That figure was $347 million in RS’s case. Crocs, Inc. (NASDAQ:CROX) is the most popular stock in this table. On the other hand Oatly Group AB (NASDAQ:OTLY) is the least popular one with only 13 bullish hedge fund positions. Reliance Steel & Aluminum Co. (NYSE:RS) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for RS is 46.1. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 31.1% in 2021 through December 9th and still beat the market by 5.1 percentage points. A small number of hedge funds were also right about betting on RS as the stock returned 10.6% since the end of the third quarter (through 12/9) and outperformed the market by an even larger margin.

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