Legendary investors such as Jeffrey Talpins and Seth Klarman earn enormous amounts of money for themselves and their investors by doing in-depth research on small-cap stocks that big brokerage houses don’t publish. Small cap stocks -especially when they are screened well- can generate substantial outperformance versus a boring index fund. That’s why we analyze the activity of those elite funds in these small-cap stocks. In the following paragraphs, we analyze RBC Bearings Incorporated (NASDAQ:ROLL) from the perspective of those elite funds.
RBC Bearings Incorporated (NASDAQ:ROLL) shareholders have witnessed a decrease in hedge fund sentiment of late. ROLL was in 6 hedge funds’ portfolios at the end of the fourth quarter of 2018. There were 7 hedge funds in our database with ROLL positions at the end of the previous quarter. Our calculations also showed that ROLL 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 32 percentage points since May 2014 through March 12, 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 27.5% through March 12, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We’re going to take a glance at the fresh hedge fund action surrounding RBC Bearings Incorporated (NASDAQ:ROLL).
What have hedge funds been doing with RBC Bearings Incorporated (NASDAQ:ROLL)?
At the end of the fourth quarter, a total of 6 of the hedge funds tracked by Insider Monkey were long this stock, a change of -14% from the previous quarter. The graph below displays the number of hedge funds with bullish position in ROLL over the last 14 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 upping their holdings considerably (or already accumulated large positions).
The largest stake in RBC Bearings Incorporated (NASDAQ:ROLL) was held by Royce & Associates, which reported holding $45.2 million worth of stock at the end of December. It was followed by GLG Partners with a $0.8 million position. Other investors bullish on the company included Citadel Investment Group, PEAK6 Capital Management, and Winton Capital Management.
Due to the fact that RBC Bearings Incorporated (NASDAQ:ROLL) has experienced a decline in interest from hedge fund managers, logic holds that there lies a certain “tier” of money managers that slashed their entire stakes by the end of the third quarter. It’s worth mentioning that Matthew Hulsizer’s PEAK6 Capital Management sold off the largest investment of the “upper crust” of funds watched by Insider Monkey, comprising about $1.2 million in stock. Israel Englander’s fund, Millennium Management, also dropped its stock, about $0.7 million worth. These moves are important to note, as aggregate hedge fund interest dropped by 1 funds by the end of the third quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as RBC Bearings Incorporated (NASDAQ:ROLL) but similarly valued. These stocks are Lumentum Holdings Inc (NASDAQ:LITE), United States Steel Corporation (NYSE:X), Viper Energy Partners LP (NASDAQ:VNOM), and Guardant Health, Inc. (NASDAQ:GH). This group of stocks’ market caps are closest to ROLL’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 18 hedge funds with bullish positions and the average amount invested in these stocks was $180 million. That figure was $48 million in ROLL’s case. Lumentum Holdings Inc (NASDAQ:LITE) is the most popular stock in this table. On the other hand Guardant Health, Inc. (NASDAQ:GH) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks RBC Bearings Incorporated (NASDAQ:ROLL) is even less popular than GH. Hedge funds dodged a bullet by taking a bearish stance towards ROLL. Our calculations showed that the top 15 most popular hedge fund stocks returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately ROLL wasn’t nearly as popular as these 15 stock (hedge fund sentiment was very bearish); ROLL investors were disappointed as the stock returned -0.7% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.