We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like REX American Resources Corp (NYSE:REX).
Hedge fund interest in REX American Resources Corp (NYSE:REX) shares was flat at the end of last quarter. This is usually a negative indicator. 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 Paysign, Inc. (NASDAQ:PAYS), Independent Bank Corporation(MI) (NASDAQ:IBCP), and Akorn, Inc. (NASDAQ:AKRX) to gather more data points. Our calculations also showed that REX isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Jim Simons of Renaissance Technologies
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. Let’s take a peek at the fresh hedge fund action encompassing REX American Resources Corp (NYSE:REX).
What have hedge funds been doing with REX American Resources Corp (NYSE:REX)?
At Q3’s end, a total of 8 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards REX over the last 17 quarters. With hedge funds’ sentiment swirling, there exists a select group of notable hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
The largest stake in REX American Resources Corp (NYSE:REX) was held by Renaissance Technologies, which reported holding $38.3 million worth of stock at the end of September. It was followed by Winton Capital Management with a $1.5 million position. Other investors bullish on the company included AQR Capital Management, Citadel Investment Group, and Royce & Associates. In terms of the portfolio weights assigned to each position Renaissance Technologies allocated the biggest weight to REX American Resources Corp (NYSE:REX), around 0.03% of its 13F portfolio. Winton Capital Management is also relatively very bullish on the stock, dishing out 0.02 percent of its 13F equity portfolio to REX.
Judging by the fact that REX American Resources Corp (NYSE:REX) has witnessed a decline in interest from the entirety of the hedge funds we track, it’s easy to see that there is a sect of funds that decided to sell off their entire stakes by the end of the third quarter. Interestingly, Benjamin A. Smith’s Laurion Capital Management said goodbye to the largest position of all the hedgies tracked by Insider Monkey, totaling an estimated $0.3 million in stock. Donald Sussman’s fund, Paloma Partners, also dumped its stock, about $0.3 million worth. These bearish behaviors are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s now take a look at hedge fund activity in other stocks similar to REX American Resources Corp (NYSE:REX). We will take a look at Paysign, Inc. (NASDAQ:PAYS), Independent Bank Corporation(MI) (NASDAQ:IBCP), Akorn, Inc. (NASDAQ:AKRX), and SilverCrest Metals Inc. (NYSE:SILV). This group of stocks’ market caps resemble REX’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PAYS | 11 | 30078 | 3 |
| IBCP | 13 | 49879 | 2 |
| AKRX | 15 | 83377 | 1 |
| SILV | 3 | 15391 | 1 |
| Average | 10.5 | 44681 | 1.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.5 hedge funds with bullish positions and the average amount invested in these stocks was $45 million. That figure was $44 million in REX’s case. Akorn, Inc. (NASDAQ:AKRX) is the most popular stock in this table. On the other hand SilverCrest Metals Inc. (NYSE:SILV) is the least popular one with only 3 bullish hedge fund positions. REX American Resources Corp (NYSE:REX) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on REX as the stock returned 20.3% during the first two months of Q4 and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
