While the market driven by short-term sentiment influenced by the accommodative interest rate environment in the US, virus news and stimulus talks, many smart money investors are starting to get cautious towards the current bull run since March and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 30,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Royal Caribbean Group (NYSE:RCL).
Is RCL a good stock to buy? Royal Caribbean Group (NYSE:RCL) has experienced a decrease in enthusiasm from smart money recently. Royal Caribbean Group (NYSE:RCL) was in 30 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 52. Our calculations also showed that RCL isn’t among the 30 most popular stocks among hedge funds (click for Q3 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.
To the average investor there are numerous methods stock traders have at their disposal to assess their holdings. A duo of the less utilized methods are hedge fund and insider trading sentiment. We have shown that, historically, those who follow the best picks of the top money managers can beat their index-focused peers by a solid amount (see the details here).
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind we’re going to take a glance at the recent hedge fund action encompassing Royal Caribbean Group (NYSE:RCL).
Do Hedge Funds Think RCL Is A Good Stock To Buy Now?
At third quarter’s end, a total of 30 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -3% from the previous quarter. On the other hand, there were a total of 49 hedge funds with a bullish position in RCL a year ago. With the smart money’s capital changing hands, there exists a select group of noteworthy hedge fund managers who were upping their stakes significantly (or already accumulated large positions).
More specifically, D E Shaw was the largest shareholder of Royal Caribbean Group (NYSE:RCL), with a stake worth $202.8 million reported as of the end of September. Trailing D E Shaw was Citadel Investment Group, which amassed a stake valued at $85.1 million. Clough Capital Partners, Tremblant Capital, and Ariel 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 Deep Field Asset Management allocated the biggest weight to Royal Caribbean Group (NYSE:RCL), around 5.29% of its 13F portfolio. Kettle Hill Capital Management is also relatively very bullish on the stock, dishing out 3.25 percent of its 13F equity portfolio to RCL.
Because Royal Caribbean Group (NYSE:RCL) has witnessed falling interest from the smart money, logic holds that there lies a certain “tier” of money managers who were dropping their full holdings by the end of the third quarter. Intriguingly, Ricky Sandler’s Eminence Capital dumped the biggest position of the “upper crust” of funds monitored by Insider Monkey, totaling about $52 million in stock, and Spencer M. Waxman’s Shannon River Fund Management was right behind this move, as the fund cut about $21.3 million worth. These bearish behaviors are interesting, as total hedge fund interest dropped by 1 funds by the end of the third quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Royal Caribbean Group (NYSE:RCL) but similarly valued. We will take a look at Sun Communities Inc (NYSE:SUI), Extra Space Storage, Inc. (NYSE:EXR), BioMarin Pharmaceutical Inc. (NASDAQ:BMRN), C.H. Robinson Worldwide, Inc. (NASDAQ:CHRW), Cardinal Health, Inc. (NYSE:CAH), IDEX Corporation (NYSE:IEX), and Baker Hughes Company (NYSE:BKR). This group of stocks’ market values are similar to RCL’s market value.
|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 31.9 hedge funds with bullish positions and the average amount invested in these stocks was $686 million. That figure was $418 million in RCL’s case. Cardinal Health, Inc. (NYSE:CAH) is the most popular stock in this table. On the other hand C.H. Robinson Worldwide, Inc. (NASDAQ:CHRW) is the least popular one with only 22 bullish hedge fund positions. Royal Caribbean Group (NYSE:RCL) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for RCL is 38.7. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 33.3% in 2020 through December 18th and beat the market by 16.4 percentage points. A small number of hedge funds were also right about betting on RCL, though not to the same extent, as the stock returned 11.7% since the end of Q3 (through December 18th) and outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.