Hedge Funds Aren’t Crazy About RPM International Inc. (RPM) Anymore

In this article we will take a look at whether hedge funds think RPM International Inc. (NYSE:RPM) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

RPM International Inc. (NYSE:RPM) shareholders have witnessed a decrease in support from the world’s most elite money managers recently. Our calculations also showed that RPM isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

According to most market participants, hedge funds are assumed to be slow, old investment vehicles of years past. While there are greater than 8000 funds trading at the moment, Our researchers hone in on the leaders of this group, approximately 850 funds. These money managers preside over most of the smart money’s total asset base, and by shadowing their first-class picks, Insider Monkey has brought to light a number of investment strategies that have historically surpassed the broader indices. Insider Monkey’s flagship short hedge fund strategy exceeded the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .


Richard Chilton of Chilton Investment Company

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s take a look at the key hedge fund action regarding RPM International Inc. (NYSE:RPM).

How have hedgies been trading RPM International Inc. (NYSE:RPM)?

Heading into the second quarter of 2020, a total of 22 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -29% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards RPM over the last 18 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Hound Partners was the largest shareholder of RPM International Inc. (NYSE:RPM), with a stake worth $61.2 million reported as of the end of September. Trailing Hound Partners was Diamond Hill Capital, which amassed a stake valued at $55.3 million. Citadel Investment Group, SAYA Management, and Chilton Investment Company were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Hound Partners allocated the biggest weight to RPM International Inc. (NYSE:RPM), around 5.71% of its 13F portfolio. SAYA Management is also relatively very bullish on the stock, designating 5.55 percent of its 13F equity portfolio to RPM.

Judging by the fact that RPM International Inc. (NYSE:RPM) has experienced a decline in interest from the smart money, we can see that there were a few fund managers that decided to sell off their full holdings in the first quarter. At the top of the heap, Robert Pohly’s Samlyn Capital said goodbye to the biggest investment of all the hedgies followed by Insider Monkey, valued at close to $28.7 million in stock. Dmitry Balyasny’s fund, Balyasny Asset Management, also sold off its stock, about $12.7 million worth. These transactions are intriguing to say the least, as total hedge fund interest fell by 9 funds in the first quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as RPM International Inc. (NYSE:RPM) but similarly valued. We will take a look at Host Hotels and Resorts Inc (NYSE:HST), Mylan, Inc. (NASDAQ:MYL), InterContinental Hotels Group PLC (NYSE:IHG), and Brookfield Property Partners LP (NASDAQ:BPY). All of these stocks’ market caps resemble RPM’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
HST 24 130445 -3
MYL 49 1469905 2
IHG 4 9968 -2
BPY 7 42640 -1
Average 21 413240 -1

View table here if you experience formatting issues.

As you can see these stocks had an average of 21 hedge funds with bullish positions and the average amount invested in these stocks was $413 million. That figure was $191 million in RPM’s case. Mylan, Inc. (NASDAQ:MYL) is the most popular stock in this table. On the other hand InterContinental Hotels Group PLC (NYSE:IHG) is the least popular one with only 4 bullish hedge fund positions. RPM International Inc. (NYSE:RPM) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.9% in 2020 through June 10th but still beat the market by 14.2 percentage points. Hedge funds were also right about betting on RPM as the stock returned 33.9% in Q2 (through June 10th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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