Is Royal Bank of Canada (RY) A Good Stock to Buy?

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Due to the fact that Royal Bank of Canada (NYSE:RY) has faced declining sentiment from the aggregate hedge fund industry, it’s safe to say that there lies a certain “tier” of fund managers that elected to cut their full holdings heading into Q4. Intriguingly, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital cut the largest stake of all the hedgies followed by Insider Monkey, totaling about $6.6 million in stock. Citadel Investment Group also dropped its call options, about $2.4 million worth, while retaining its long position.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Royal Bank of Canada (NYSE:RY) but similarly valued. We will take a look at Ambev SA (ADR) (NYSE:ABEV), China Petroleum & Chemical Corp (ADR) (NYSE:SNP), Eli Lilly & Co. (NYSE:LLY), and United Technologies Corporation (NYSE:UTX). This group of stocks’ market valuations are similar to RY’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ABEV 17 422804 -4
SNP 11 41406 2
LLY 55 2889477 6
UTX 48 3552166 -8

As you can see these stocks had an average of 33 hedge funds with bullish positions and the average amount invested in these stocks was $1.73 billion. That figure was $456 million in RY’s case. Eli Lilly & Co. (NYSE:LLY) is the most popular stock in this table. On the other hand China Petroleum & Chemical Corp (ADR) (NYSE:SNP) is the least popular one with only 11 bullish hedge fund positions. Royal Bank of Canada (NYSE:RY) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard LLY might be a better candidate to consider taking a long position in.

Disclosure: None

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