Here’s What Hedge Funds Think About Regional Management Corp (RM)

At Insider Monkey we follow nearly 750 of the best-performing investors and even though many of them lost money in the last couple of months of 2018 (some actually delivered very strong returns), the history teaches us that over the long-run they still manage to beat the market, which is why it can be profitable for us to imitate their activity. Of course, even the best money managers can sometimes get it wrong, but following some of their picks gives us a better chance to outperform the crowd than picking a random stock and this is where our research comes in.

Regional Management Corp (NYSE:RM) was in 13 hedge funds’ portfolios at the end of March. RM has seen an increase in support from the world’s most elite money managers lately. There were 12 hedge funds in our database with RM positions at the end of the previous quarter. Our calculations also showed that rm 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’ 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.

Matthew Lindenbaum Basswood Capital

We’re going to take a glance at the fresh hedge fund action encompassing Regional Management Corp (NYSE:RM).

What does smart money think about Regional Management Corp (NYSE:RM)?

Heading into the second quarter of 2019, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 8% from the fourth quarter of 2018. On the other hand, there were a total of 9 hedge funds with a bullish position in RM a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with RM Positions

The largest stake in Regional Management Corp (NYSE:RM) was held by Basswood Capital, which reported holding $37.3 million worth of stock at the end of March. It was followed by Renaissance Technologies with a $11.1 million position. Other investors bullish on the company included Cannell Capital, GLG Partners, and Arrowstreet Capital.

Consequently, key hedge funds were breaking ground themselves. Winton Capital Management, managed by David Harding, assembled the most outsized position in Regional Management Corp (NYSE:RM). Winton Capital Management had $0.2 million invested in the company at the end of the quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Regional Management Corp (NYSE:RM) but similarly valued. These stocks are Entravision Communication Corporation (NYSE:EVC), Metropolitan Bank Holding Corp. (NYSE:MCB), USD Partners LP (NYSE:USDP), and Nordic American Tanker Ltd (NYSE:NAT). This group of stocks’ market valuations are similar to RM’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
EVC 11 18168 -1
MCB 8 53783 1
USDP 4 3866 3
NAT 7 5932 1
Average 7.5 20437 1

View table here if you experience formatting issues.

As you can see these stocks had an average of 7.5 hedge funds with bullish positions and the average amount invested in these stocks was $20 million. That figure was $75 million in RM’s case. Entravision Communication Corporation (NYSE:EVC) is the most popular stock in this table. On the other hand USD Partners LP (NYSE:USDP) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Regional Management Corp (NYSE:RM) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Hedge funds were also right about betting on RM, though not to the same extent, as the stock returned 4% during the same period and outperformed the market as well.

Disclosure: None. This article was originally published at Insider Monkey.