Is Rio Tinto plc (ADR) (RIO) Going to Burn These Hedge Funds?

A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended September 30, so let’s proceed with the discussion of the hedge fund sentiment on Rio Tinto plc (ADR) (NYSE:RIO).

Rio Tinto plc was in 19 hedge funds’ portfolios at the end of September. RIO investors should pay attention to an increase in support from the world’s most elite money managers in recent months. There were 18 hedge funds in our database with RIO positions at the end of the previous quarter. At the end of this article we will also compare RIO to other stocks, including Morgan Stanley (NYSE:MS), Valeant Pharmaceuticals Intl Inc (NYSE:VRX), and Kinder Morgan Inc (NYSE:KMI) to get a better sense of its popularity.

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In the financial world, there are dozens of metrics shareholders use to assess publicly traded companies. A duo of the most under-the-radar metrics are hedge fund and insider trading activity. Our experts have shown that, historically, those who follow the best picks of the best hedge fund managers can beat their index-focused peers by a very impressive margin (see the details here).

Now, we’re going to take a look at the key action regarding Rio Tinto plc (ADR) (NYSE:RIO).

What have hedge funds been doing with Rio Tinto plc (ADR) (NYSE:RIO)?

At the end of the third quarter, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 6% from one quarter earlier. With hedge funds’ capital changing hands, there exists a few notable hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital has the biggest position in Rio Tinto plc (ADR) (NYSE:RIO), worth close to $43.3 million, amounting to 0.2% of its total 13F portfolio. Coming in second is PEAK6 Capital Management, led by Matthew Hulsizer, holding a $34.4 million call position; the fund has 0.2% of its 13F portfolio invested in the stock. Other peers that are bullish contain Israel Englander’s Millennium Management, Ray Dalio’s Bridgewater Associates and Jonathan Barrett and Paul Segal’s Luminus Management.

With a general bullishness amongst the heavyweights, key money managers were breaking ground themselves. Luminus Management assembled the biggest position in Rio Tinto plc (ADR) (NYSE:RIO). Luminus Management had $7.1 million invested in the company at the end of the quarter. John Thiessen’s Vertex One Asset Management also made a $6.8 million investment in the stock during the quarter. The following funds were also among the new RIO investors: Sander Gerber’s Hudson Bay Capital Management and David Costen Haley’s HBK Investments.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Rio Tinto plc (ADR) (NYSE:RIO) but similarly valued. We will take a look at Morgan Stanley (NYSE:MS), Valeant Pharmaceuticals Intl Inc (NYSE:VRX), Kinder Morgan Inc (NYSE:KMI), and Abbott Laboratories (NYSE:ABT). This group of stocks’ market caps resemble RIO’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MS 57 2391811 9
VRX 88 17733508 -10
KMI 72 1826860 8
ABT 55 2077991 6

As you can see these stocks had an average of 68 hedge funds with bullish positions and the average amount invested in these stocks was $6.0 billion, compared to just $147 million in RIO’s case. Valeant Pharmaceuticals Intl Inc (NYSE:VRX) is the most popular stock in this table, while Abbott Laboratories (NYSE:ABT) is the least popular one with only 55 bullish hedge fund positions. Compared to these stocks Rio Tinto plc (ADR) (NYSE:RIO) is even less popular than ABT. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.