Is Range Resources Corp. (RRC) a Good Buy?

The worries about the economic slowdown in China and the ongoing uncertainty about the path of interest-rate increases triggered several waves of equity sell-offs during the third quarter. Of course, most hedge funds and other asset managers had to stomach substantial losses during the bloody three-month period, which might have caused some to consider fleeing the U.S. equity markets. Interestingly, smaller-cap stocks registered higher losses than large-capitalization stocks during the September quarter, suggesting that institutional investors heavily discarded seemingly riskier equities amid high uncertainty and turmoil. In fact, the Russell 2000 Index lost 11.9% in the third quarter, while the Standard and Poor’s 500 benchmark declined a mere 6.4%. This article will lay out and discuss the hedge fund and institutional investor sentiment towards Range Resources Corp. (NYSE:RRC).

Range Resources Corp. (NYSE:RRC) has seen a decrease in enthusiasm from smart money of late. RRC was in 31 hedge funds’ portfolios at the end of September. There were 42 hedge funds in our database with RRC positions at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Service Corporation International (NYSE:SCI), Westar Energy Inc (NYSE:WR), and Carlyle Group LP (NASDAQ:CG) to gather more data points.

Today there are tons of tools stock traders employ to evaluate publicly traded companies. Two of the most underrated tools are hedge fund and insider trading interest. We have shown that, historically, those who follow the best picks of the elite money managers can trounce the S&P 500 by a healthy margin (see the details here).

Now, we’re going to take a look at the fresh action regarding Range Resources Corp. (NYSE:RRC).

How have hedgies been trading Range Resources Corp. (NYSE:RRC)?

At the end of the third quarter, a total of 31 of the hedge funds tracked by Insider Monkey were long this stock, a change of -26% from the previous quarter. With hedge funds’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were upping their stakes considerably (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, John H. Scully’s SPO Advisory Corp has the most valuable position in Range Resources Corp. (NYSE:RRC), worth close to $171.9 million, corresponding to 2.9% of its total 13F portfolio. The second largest stake is held by Ross Margolies of Stelliam Investment Management, with a $132.5 million position; 3.3% of its 13F portfolio is allocated to the company. Some other members of the smart money that are bullish contain Wallace Weitz’s Wallace R. Weitz & Co., Alan Fournier’s Pennant Capital Management and William C. Martin’s Raging Capital Management.

Because Range Resources Corp. (NYSE:RRC) has faced falling interest from the entirety of the hedge funds we track, it’s safe to say that there exists a select few funds who were dropping their positions entirely heading into Q4. It’s worth mentioning that Israel Englander’s Millennium Management dropped the biggest stake of the 700 funds watched by Insider Monkey, comprising an estimated $38.6 million in stock. Jim Simons’ fund, Renaissance Technologies, also dropped its stock, about $36.2 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest fell by 11 funds heading into Q4.

Let’s also examine hedge fund activity in other stocks similar to Range Resources Corp. (NYSE:RRC). These stocks are Service Corporation International (NYSE:SCI), Westar Energy Inc (NYSE:WR), Carlyle Group LP (NASDAQ:CG), and IAC/InterActiveCorp (NASDAQ:IACI). All of these stocks’ market caps match RRC’s market cap.

As you can see these stocks had an average of 26.5 hedge funds with bullish positions and the average amount invested in these stocks was $592 million. That figure was $745 million in RRC’s case. IAC/InterActiveCorp (NASDAQ:IACI) is the most popular stock in this table. On the other hand Westar Energy Inc (NYSE:WR) is the least popular one with only 10 bullish hedge fund positions. Range Resources Corp. (NYSE:RRC) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard IACI might be a better candidate to consider a long position.