The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on March 31st, about a week after the S&P 500 Index bottomed. We at Insider Monkey have made an extensive database of more than 821 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded Regal Beloit Corporation (NYSE:RBC) based on those filings.
Regal Beloit Corporation (NYSE:RBC) has experienced a decrease in enthusiasm from smart money of late. Our calculations also showed that RBC 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.
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 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 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.
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. 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 take a glance at the recent hedge fund action surrounding Regal Beloit Corporation (NYSE:RBC).
What does smart money think about Regal Beloit Corporation (NYSE:RBC)?
Heading into the second quarter of 2020, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -21% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards RBC over the last 18 quarters. With hedgies’ sentiment swirling, there exists a select group of key hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).
More specifically, AQR Capital Management was the largest shareholder of Regal Beloit Corporation (NYSE:RBC), with a stake worth $64.7 million reported as of the end of September. Trailing AQR Capital Management was Citadel Investment Group, which amassed a stake valued at $52.6 million. Fisher Asset Management, Arrowstreet Capital, and Marshall Wace LLP 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 Prospector Partners allocated the biggest weight to Regal Beloit Corporation (NYSE:RBC), around 0.55% of its 13F portfolio. Interval Partners is also relatively very bullish on the stock, dishing out 0.16 percent of its 13F equity portfolio to RBC.
Because Regal Beloit Corporation (NYSE:RBC) has witnessed falling interest from the entirety of the hedge funds we track, we can see that there exists a select few funds that slashed their full holdings by the end of the first quarter. At the top of the heap, Israel Englander’s Millennium Management dumped the biggest position of the 750 funds watched by Insider Monkey, worth an estimated $23.9 million in stock. Brandon Haley’s fund, Holocene Advisors, also said goodbye to its stock, about $1.2 million worth. These moves are important to note, as total hedge fund interest dropped by 5 funds by the end of the first quarter.
Let’s check out hedge fund activity in other stocks similar to Regal Beloit Corporation (NYSE:RBC). We will take a look at Freshpet Inc (NASDAQ:FRPT), Taubman Centers, Inc. (NYSE:TCO), Gildan Activewear Inc (NYSE:GIL), and Brighthouse Financial, Inc. (NASDAQ:BHF). All of these stocks’ market caps are similar to RBC’s market cap.
|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 27.25 hedge funds with bullish positions and the average amount invested in these stocks was $317 million. That figure was $205 million in RBC’s case. Taubman Centers, Inc. (NYSE:TCO) is the most popular stock in this table. On the other hand Gildan Activewear Inc (NYSE:GIL) is the least popular one with only 22 bullish hedge fund positions. Compared to these stocks Regal Beloit Corporation (NYSE:RBC) is even less popular than GIL. Hedge funds clearly dropped the ball on RBC as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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 13.4% in 2020 through June 22nd and still beat the market by 15.9 percentage points. A small number of hedge funds were also right about betting on RBC as the stock returned 31.3% so far in the second quarter and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.