Is RenaissanceRe Holdings Ltd. (RNR) Going to Burn These Hedge Funds?

“Market volatility has picked up again over the past few weeks. Headlines highlight risks regarding interest rates, the Fed, China, house prices, auto sales, trade wars, and more. Uncertainty abounds. But doesn’t it always? I have no view on whether the recent volatility will continue for a while, or whether the market will be back at all-time highs before we know it. I remain focused on preserving and growing our capital, and continue to believe that the best way to do so is via a value-driven, concentrated, patient approach. I shun consensus holdings, rich valuations, and market fads, in favor of solid, yet frequently off-the-beaten-path, businesses run by excellent, aligned management teams, purchased at deep discounts to intrinsic value,” are the words of Maran Capital’s Dan Roller. His stock picks have been beating the S&P 500 Index handily. We pay attention to what hedge funds are doing in a particular stock before considering a potential investment because it works for us. So let’s take a glance at the smart money sentiment towards RenaissanceRe Holdings Ltd. (NYSE:RNR) and see how it was affected.

RenaissanceRe Holdings Ltd. (NYSE:RNR) was in 20 hedge funds’ portfolios at the end of September. RNR shareholders have witnessed an increase in hedge fund interest in recent months. There were 16 hedge funds in our database with RNR holdings at the end of the previous quarter. Our calculations also showed that rnr 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 18 percentage points since May 2014 through December 3, 2018 (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 24% through December 3, 2018. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Dmitry Balyasny

Let’s take a peek at the new hedge fund action encompassing RenaissanceRe Holdings Ltd. (NYSE:RNR).

What does the smart money think about RenaissanceRe Holdings Ltd. (NYSE:RNR)?

At the end of the third quarter, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a change of 25% from one quarter earlier. On the other hand, there were a total of 18 hedge funds with a bullish position in RNR at the beginning of this year. With the smart money’s sentiment swirling, there exists a select group of notable hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).

No of Hedge Funds with RNR Positions

More specifically, Renaissance Technologies was the largest shareholder of RenaissanceRe Holdings Ltd. (NYSE:RNR), with a stake worth $188.2 million reported as of the end of September. Trailing Renaissance Technologies was Abrams Bison Investments, which amassed a stake valued at $83.6 million. Polar Capital, Balyasny Asset Management, and Prospector Partners were also very fond of the stock, giving the stock large weights in their portfolios.

Now, key money managers have been driving this bullishness. Diamond Hill Capital, managed by Ric Dillon, initiated the biggest position in RenaissanceRe Holdings Ltd. (NYSE:RNR). Diamond Hill Capital had $11.6 million invested in the company at the end of the quarter. Robert Rodriguez and Steven Romick’s First Pacific Advisors LLC also initiated a $2.7 million position during the quarter. The following funds were also among the new RNR investors: Paul Marshall and Ian Wace’s Marshall Wace LLP, Ian Simm’s Impax Asset Management, and Ron Bobman’s Capital Returns Management.

Let’s check out hedge fund activity in other stocks similar to RenaissanceRe Holdings Ltd. (NYSE:RNR). We will take a look at Elbit Systems Ltd. (NASDAQ:ESLT), ITT Inc. (NYSE:ITT), Morningstar, Inc. (NASDAQ:MORN), and Synovus Financial Corp. (NYSE:SNV). All of these stocks’ market caps resemble RNR’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ESLT 2 15993 -1
ITT 19 337779 -4
MORN 19 204386 2
SNV 32 753690 3
Average 18 327962 0

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 $328 million. That figure was $478 million in RNR’s case. Synovus Financial Corp. (NYSE:SNV) is the most popular stock in this table. On the other hand Elbit Systems Ltd. (NASDAQ:ESLT) is the least popular one with only 2 bullish hedge fund positions. RenaissanceRe Holdings Ltd. (NYSE:RNR) 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 SNV might be a better candidate to consider a long position.

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