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 Relx PLC (NYSE:RELX) based on those filings.
Relx PLC (NYSE:RELX) has experienced a decrease in hedge fund sentiment in recent months. RELX was in 5 hedge funds’ portfolios at the end of the first quarter of 2020. There were 7 hedge funds in our database with RELX positions at the end of the previous quarter. Our calculations also showed that RELX 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.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
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 stocks recommended/scorned by legendary Bill Miller. 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 review the new hedge fund action regarding Relx PLC (NYSE:RELX).
What does smart money think about Relx PLC (NYSE:RELX)?
Heading into the second quarter of 2020, a total of 5 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -29% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in RELX over the last 18 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in Relx PLC (NYSE:RELX), which was worth $70.6 million at the end of the third quarter. On the second spot was Arrowstreet Capital which amassed $23.4 million worth of shares. Marshall Wace LLP, Millennium Management, and Qtron Investments 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 Qtron Investments allocated the biggest weight to Relx PLC (NYSE:RELX), around 0.37% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, dishing out 0.07 percent of its 13F equity portfolio to RELX.
Seeing as Relx PLC (NYSE:RELX) has experienced bearish sentiment from the smart money, logic holds that there lies a certain “tier” of money managers who were dropping their entire stakes by the end of the first quarter. At the top of the heap, D. E. Shaw’s D E Shaw sold off the largest investment of the 750 funds tracked by Insider Monkey, totaling an estimated $0.4 million in stock. Dmitry Balyasny’s fund, Balyasny Asset Management, also dropped its stock, about $0.3 million worth. These transactions are important to note, as aggregate hedge fund interest fell by 2 funds by the end of the first quarter.
Let’s now take a look at hedge fund activity in other stocks similar to Relx PLC (NYSE:RELX). These stocks are Baxter International Inc. (NYSE:BAX), The PNC Financial Services Group, Inc. (NYSE:PNC), NetEase, Inc (NASDAQ:NTES), and National Grid plc (NYSE:NGG). This group of stocks’ market caps resemble RELX’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 33.75 hedge funds with bullish positions and the average amount invested in these stocks was $2049 million. That figure was $97 million in RELX’s case. Baxter International Inc. (NYSE:BAX) is the most popular stock in this table. On the other hand National Grid plc (NYSE:NGG) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Relx PLC (NYSE:RELX) is even less popular than NGG. Hedge funds dodged a bullet by taking a bearish stance towards RELX. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May but managed to beat the market by 13.2 percentage points. Unfortunately RELX wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); RELX investors were disappointed as the stock returned 10.9% during the second quarter (through the end of May) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.