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Is Ralph Lauren Corporation (RL) Going to Burn These Hedge Funds?

Is Ralph Lauren Corporation (NYSE:RL) a good equity to bet on right now? We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Is Ralph Lauren Corporation (NYSE:RL) a buy right now? The best stock pickers are becoming hopeful. The number of bullish hedge fund positions inched up by 1 recently. Our calculations also showed that RL isn’t among the 30 most popular stocks among hedge funds (see the video below). RL was in 35 hedge funds’ portfolios at the end of the second quarter of 2019. There were 34 hedge funds in our database with RL positions at the end of the previous quarter.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

In the eyes of most investors, hedge funds are viewed as underperforming, outdated financial vehicles of the past. While there are more than 8000 funds with their doors open today, Our researchers look at the crème de la crème of this club, approximately 750 funds. These money managers watch over most of the smart money’s total capital, and by observing their best stock picks, Insider Monkey has figured out various investment strategies that have historically outperformed the market. Insider Monkey’s flagship hedge fund strategy outpaced the S&P 500 index by around 5 percentage points per year since its inception in May 2014. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 25.7% since February 2017 (through September 30th) even though the market was up more than 33% during the same period. We just shared a list of 10 short targets in our latest quarterly update .

RL_oct2019

Unlike this former hedge fund manager 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. Let’s take a peek at the fresh hedge fund action surrounding Ralph Lauren Corporation (NYSE:RL).

How are hedge funds trading Ralph Lauren Corporation (NYSE:RL)?

At Q2’s end, a total of 35 of the hedge funds tracked by Insider Monkey were long this stock, a change of 3% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards RL over the last 16 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

David Harding

Among these funds, Renaissance Technologies held the most valuable stake in Ralph Lauren Corporation (NYSE:RL), which was worth $466.5 million at the end of the second quarter. On the second spot was AQR Capital Management which amassed $209.5 million worth of shares. Moreover, Marshall Wace LLP, Arrowstreet Capital, and Citadel Investment Group were also bullish on Ralph Lauren Corporation (NYSE:RL), allocating a large percentage of their portfolios to this stock.

With a general bullishness amongst the heavyweights, key hedge funds were breaking ground themselves. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, created the most valuable position in Ralph Lauren Corporation (NYSE:RL). Arrowstreet Capital had $82.8 million invested in the company at the end of the quarter. Lee Ainslie’s Maverick Capital also made a $9.4 million investment in the stock during the quarter. The other funds with brand new RL positions are Chuck Royce’s Royce & Associates, Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners, and David Harding’s Winton Capital Management.

Let’s check out hedge fund activity in other stocks similar to Ralph Lauren Corporation (NYSE:RL). We will take a look at BorgWarner Inc. (NYSE:BWA), Companhia de Saneamento Basico do Estado de Sao Paulo – SABESP (NYSE:SBS), StoneCo Ltd. (NASDAQ:STNE), and Gaming and Leisure Properties Inc (NASDAQ:GLPI). This group of stocks’ market values are similar to RL’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BWA 21 831068 0
SBS 12 451545 -4
STNE 27 1129870 4
GLPI 27 783348 0
Average 21.75 798958 0

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.75 hedge funds with bullish positions and the average amount invested in these stocks was $799 million. That figure was $1097 million in RL’s case. StoneCo Ltd. (NASDAQ:STNE) is the most popular stock in this table. On the other hand Companhia de Saneamento Basico do Estado de Sao Paulo – SABESP (NYSE:SBS) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Ralph Lauren Corporation (NYSE:RL) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately RL wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on RL were disappointed as the stock returned -15.3% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market in Q3.

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

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