At Insider Monkey we track the activity of some of the best-performing hedge funds like Appaloosa Management, Baupost, and Tiger Global because we determined that some of the stocks that they are collectively bullish on can help us generate returns above the broader indices. Out of thousands of stocks that hedge funds invest in, small-caps can provide the best returns over the long term due to the fact that these companies are less efficiently priced and are usually under the radars of mass-media, analysts and dumb money. This is why we follow the smart money moves in the small-cap space.
Regions Financial Corporation (NYSE:RF) shareholders have witnessed a decrease in activity from the world’s largest hedge funds recently. RF was in 32 hedge funds’ portfolios at the end of the second quarter of 2019. There were 41 hedge funds in our database with RF positions at the end of the previous quarter. Our calculations also showed that RF isn’t among the 30 most popular stocks among hedge funds.
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’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, 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 new hedge fund action encompassing Regions Financial Corporation (NYSE:RF).
How have hedgies been trading Regions Financial Corporation (NYSE:RF)?
At Q2’s end, a total of 32 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -22% from the previous quarter. On the other hand, there were a total of 41 hedge funds with a bullish position in RF 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.
Among these funds, Citadel Investment Group held the most valuable stake in Regions Financial Corporation (NYSE:RF), which was worth $133.9 million at the end of the second quarter. On the second spot was Two Sigma Advisors which amassed $97.7 million worth of shares. Moreover, Arrowstreet Capital, Pzena Investment Management, and Millennium Management were also bullish on Regions Financial Corporation (NYSE:RF), allocating a large percentage of their portfolios to this stock.
Since Regions Financial Corporation (NYSE:RF) has witnessed bearish sentiment from the smart money, logic holds that there exists a select few hedgies who sold off their positions entirely by the end of the second quarter. It’s worth mentioning that Clint Carlson’s Carlson Capital dumped the largest investment of all the hedgies monitored by Insider Monkey, totaling an estimated $31.6 million in stock, and Phill Gross and Robert Atchinson’s Adage Capital Management was right behind this move, as the fund cut about $21.7 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest fell by 9 funds by the end of the second quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Regions Financial Corporation (NYSE:RF) but similarly valued. These stocks are BioMarin Pharmaceutical Inc. (NASDAQ:BMRN), Xylem Inc (NYSE:XYL), DXC Technology Company (NYSE:DXC), and Gartner Inc (NYSE:IT). This group of stocks’ market values match RF’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BMRN | 45 | 2076416 | 4 |
| XYL | 19 | 674762 | 6 |
| DXC | 41 | 2116402 | -5 |
| IT | 17 | 1005108 | 2 |
| Average | 30.5 | 1468172 | 1.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 30.5 hedge funds with bullish positions and the average amount invested in these stocks was $1468 million. That figure was $700 million in RF’s case. BioMarin Pharmaceutical Inc. (NASDAQ:BMRN) is the most popular stock in this table. On the other hand Gartner Inc (NYSE:IT) is the least popular one with only 17 bullish hedge fund positions. Regions Financial Corporation (NYSE:RF) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks (see the video below) among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Hedge funds were also right about betting on RF as the stock returned 7% during the third quarter and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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.
