As we already know from media reports and hedge fund investor letters, hedge funds delivered their best returns in a decade. Most investors who decided to stick with hedge funds after a rough 2018 recouped their losses by the end of the second quarter. We get to see hedge funds’ thoughts towards the market and individual stocks by aggregating their quarterly portfolio movements and reading their investor letters. In this article, we will particularly take a look at what hedge funds think about Raymond James Financial, Inc. (NYSE:RJF).
Hedge fund interest in Raymond James Financial, Inc. (NYSE:RJF) shares was flat at the end of last quarter. This is usually a negative indicator. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as PG&E Corporation (NYSE:PCG), ABIOMED, Inc. (NASDAQ:ABMD), and Nomura Holdings, Inc. (NYSE:NMR) to gather more data points.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Unlike this former hedge fund manager who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to take a look at the recent hedge fund action encompassing Raymond James Financial, Inc. (NYSE:RJF).
What have hedge funds been doing with Raymond James Financial, Inc. (NYSE:RJF)?
At Q2’s end, a total of 35 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards RJF over the last 16 quarters. With the smart money’s sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).
The largest stake in Raymond James Financial, Inc. (NYSE:RJF) was held by Brave Warrior Capital, which reported holding $205.7 million worth of stock at the end of March. It was followed by Fisher Asset Management with a $114.9 million position. Other investors bullish on the company included Millennium Management, Balyasny Asset Management, and East Side Capital (RR Partners).
Because Raymond James Financial, Inc. (NYSE:RJF) has experienced falling interest from the smart money, it’s safe to say that there lies a certain “tier” of hedge funds who sold off their positions entirely last quarter. At the top of the heap, James Parsons’s Junto Capital Management sold off the biggest position of the “upper crust” of funds monitored by Insider Monkey, worth about $27.3 million in stock, and Matthew Tewksbury’s Stevens Capital Management was right behind this move, as the fund said goodbye to about $8.5 million worth. These bearish behaviors are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s also examine hedge fund activity in other stocks similar to Raymond James Financial, Inc. (NYSE:RJF). We will take a look at PG&E Corporation (NYSE:PCG), ABIOMED, Inc. (NASDAQ:ABMD), Nomura Holdings, Inc. (NYSE:NMR), and Alliant Energy Corporation (NASDAQ:LNT). This group of stocks’ market caps are closest to RJF’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PCG | 67 | 6316603 | -5 |
| ABMD | 28 | 1005300 | -5 |
| NMR | 7 | 23320 | 2 |
| LNT | 26 | 652790 | 9 |
| Average | 32 | 1999503 | 0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 32 hedge funds with bullish positions and the average amount invested in these stocks was $2000 million. That figure was $764 million in RJF’s case. PG&E Corporation (NYSE:PCG) is the most popular stock in this table. On the other hand Nomura Holdings, Inc. (NYSE:NMR) is the least popular one with only 7 bullish hedge fund positions. Raymond James Financial, Inc. (NYSE:RJF) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately RJF wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on RJF were disappointed as the stock returned -2.1% during the third 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 (see the video below) among hedge funds as many of these stocks already outperformed the market so far this year.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
