The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 821 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of March 31st, 2020. In this article we are going to take a look at smart money sentiment towards Royal Caribbean Cruises Ltd. (NYSE:RCL).
Is Royal Caribbean Cruises Ltd. (NYSE:RCL) the right pick for your portfolio? Hedge funds are becoming less confident. The number of bullish hedge fund bets went down by 18 recently. Our calculations also showed that RCL 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). RCL was in 25 hedge funds’ portfolios at the end of March. There were 43 hedge funds in our database with RCL holdings at the end of the previous quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like these. 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 we’re going to go over the key hedge fund action surrounding Royal Caribbean Cruises Ltd. (NYSE:RCL).
How are hedge funds trading Royal Caribbean Cruises Ltd. (NYSE:RCL)?
At the end of the first quarter, a total of 25 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -42% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in RCL over the last 18 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Eminence Capital, managed by Ricky Sandler, holds the largest position in Royal Caribbean Cruises Ltd. (NYSE:RCL). Eminence Capital has a $198.9 million position in the stock, comprising 2.2% of its 13F portfolio. The second largest stake is held by D E Shaw, managed by D. E. Shaw, which holds a $44.5 million position; 0.1% of its 13F portfolio is allocated to the company. Some other peers that are bullish include Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, John W. Rogers’s Ariel Investments and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Axel Capital Management allocated the biggest weight to Royal Caribbean Cruises Ltd. (NYSE:RCL), around 5.75% of its 13F portfolio. MIG Capital is also relatively very bullish on the stock, designating 2.68 percent of its 13F equity portfolio to RCL.
Because Royal Caribbean Cruises Ltd. (NYSE:RCL) has faced bearish sentiment from hedge fund managers, we can see that there lies a certain “tier” of hedge funds that decided to sell off their full holdings heading into Q4. Interestingly, Andrew Immerman and Jeremy Schiffman’s Palestra Capital Management cut the biggest stake of all the hedgies tracked by Insider Monkey, totaling an estimated $96.3 million in stock, and Ken Griffin’s Citadel Investment Group was right behind this move, as the fund dropped about $79 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest dropped by 18 funds heading into Q4.
Let’s now take a look at hedge fund activity in other stocks similar to Royal Caribbean Cruises Ltd. (NYSE:RCL). We will take a look at Equitable Holdings, Inc. (NYSE:EQH), Dynatrace, Inc. (NYSE:DT), Dr. Reddy’s Laboratories Limited (NYSE:RDY), and Darden Restaurants, Inc. (NYSE:DRI). This group of stocks’ market valuations match RCL’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 31.25 hedge funds with bullish positions and the average amount invested in these stocks was $635 million. That figure was $406 million in RCL’s case. Darden Restaurants, Inc. (NYSE:DRI) is the most popular stock in this table. On the other hand Dr. Reddy’s Laboratories Limited (NYSE:RDY) is the least popular one with only 11 bullish hedge fund positions. Royal Caribbean Cruises Ltd. (NYSE:RCL) is not the least popular stock in this group but hedge fund interest is still below 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 and still beat the market by 14.2 percentage points. A small number of hedge funds were also right about betting on RCL as the stock returned 97.7% during the second quarter and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.