In this article we will check out the progression of hedge fund sentiment towards Reynolds Consumer Products Inc. (NASDAQ:REYN) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Is REYN a good stock to buy now? Money managers were getting more optimistic. The number of long hedge fund bets inched up by 1 lately. Reynolds Consumer Products Inc. (NASDAQ:REYN) was in 18 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 17. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that REYN 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.
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 monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 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.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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 look at the latest hedge fund action regarding Reynolds Consumer Products Inc. (NASDAQ:REYN).
Do Hedge Funds Think REYN Is A Good Stock To Buy Now?
At third quarter’s end, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 6% from the second quarter of 2020. The graph below displays the number of hedge funds with bullish position in REYN over the last 21 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Reynolds Consumer Products Inc. (NASDAQ:REYN) was held by Southpoint Capital Advisors, which reported holding $116.4 million worth of stock at the end of September. It was followed by Alyeska Investment Group with a $44.8 million position. Other investors bullish on the company included Laurion Capital Management, GLG Partners, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Southpoint Capital Advisors allocated the biggest weight to Reynolds Consumer Products Inc. (NASDAQ:REYN), around 2.65% of its 13F portfolio. Alyeska Investment Group is also relatively very bullish on the stock, setting aside 0.69 percent of its 13F equity portfolio to REYN.
As industrywide interest jumped, specific money managers have jumped into Reynolds Consumer Products Inc. (NASDAQ:REYN) headfirst. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, created the most outsized position in Reynolds Consumer Products Inc. (NASDAQ:REYN). Marshall Wace LLP had $5 million invested in the company at the end of the quarter. Chuck Royce’s Royce & Associates also initiated a $4.2 million position during the quarter. The following funds were also among the new REYN investors: Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Brandon Haley’s Holocene Advisors, and Karim Abbadi and Edward McBride’s Centiva Capital.
Let’s also examine hedge fund activity in other stocks similar to Reynolds Consumer Products Inc. (NASDAQ:REYN). These stocks are Berry Global Group Inc (NYSE:BERY), Bunge Limited (NYSE:BG), Autoliv Inc. (NYSE:ALV), The Gap Inc. (NYSE:GPS), SolarWinds Corporation (NYSE:SWI), Gentex Corporation (NASDAQ:GNTX), and Gerdau SA (NYSE:GGB). This group of stocks’ market caps resemble REYN’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 29.1 hedge funds with bullish positions and the average amount invested in these stocks was $955 million. That figure was $240 million in REYN’s case. Berry Global Group Inc (NYSE:BERY) is the most popular stock in this table. On the other hand Gerdau SA (NYSE:GGB) is the least popular one with only 11 bullish hedge fund positions. Reynolds Consumer Products Inc. (NASDAQ:REYN) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for REYN is 46.9. 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. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 30.7% in 2020 through December 14th and surpassed the market again by 15.8 percentage points. Unfortunately REYN wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); REYN investors were disappointed as the stock returned -0.8% since the end of September (through 12/14) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Disclosure: None. This article was originally published at Insider Monkey.