We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (read our latest 10 coronavirus predictions).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. 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 December 31, so let’s proceed with the discussion of the hedge fund sentiment on Ryanair Holdings plc (NASDAQ:RYAAY).
Hedge fund interest in Ryanair Holdings plc (NASDAQ:RYAAY) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare RYAAY to other stocks including Mettler-Toledo International Inc. (NYSE:MTD), The Clorox Company (NYSE:CLX), and Cheniere Energy Partners LP (NYSE:CQP) to get a better sense of its popularity.
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’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 41 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s take a look at the fresh hedge fund action regarding Ryanair Holdings plc (NASDAQ:RYAAY).
Hedge fund activity in Ryanair Holdings plc (NASDAQ:RYAAY)
At the end of the fourth quarter, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the third quarter of 2019. The graph below displays the number of hedge funds with bullish position in RYAAY over the last 18 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Renaissance Technologies, founded by Jim Simons, holds the most valuable position in Ryanair Holdings plc (NASDAQ:RYAAY). Renaissance Technologies has a $305.7 million position in the stock, comprising 0.2% of its 13F portfolio. Sitting at the No. 2 spot is Immersion Capital, led by Michael Sidhom, holding a $151.1 million position; the fund has 21.8% of its 13F portfolio invested in the stock. Remaining professional money managers with similar optimism encompass William B. Gray’s Orbis Investment Management, Jeremy Hosking’s Hosking Partners and D. E. Shaw’s D E Shaw. In terms of the portfolio weights assigned to each position Immersion Capital allocated the biggest weight to Ryanair Holdings plc (NASDAQ:RYAAY), around 21.83% of its 13F portfolio. Teewinot Capital Advisers is also relatively very bullish on the stock, earmarking 11.31 percent of its 13F equity portfolio to RYAAY.
Seeing as Ryanair Holdings plc (NASDAQ:RYAAY) has faced a decline in interest from the aggregate hedge fund industry, it’s safe to say that there lies a certain “tier” of funds that slashed their positions entirely last quarter. Interestingly, Simon Sadler’s Segantii Capital dropped the largest investment of the “upper crust” of funds followed by Insider Monkey, worth close to $4.7 million in stock. Benjamin A. Smith’s fund, Laurion Capital Management, also dumped its stock, about $1.9 million worth. These moves are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Ryanair Holdings plc (NASDAQ:RYAAY) but similarly valued. We will take a look at Mettler-Toledo International Inc. (NYSE:MTD), The Clorox Company (NYSE:CLX), Cheniere Energy Partners LP (NYSE:CQP), and Keysight Technologies Inc (NYSE:KEYS). All of these stocks’ market caps are similar to RYAAY’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 28 hedge funds with bullish positions and the average amount invested in these stocks was $616 million. That figure was $830 million in RYAAY’s case. Keysight Technologies Inc (NYSE:KEYS) is the most popular stock in this table. On the other hand Cheniere Energy Partners LP (NYSE:CQP) is the least popular one with only 7 bullish hedge fund positions. Ryanair Holdings plc (NASDAQ:RYAAY) 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. 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 10.1 percentage points. These stocks lost 22.3% in 2020 through March 16th but beat the market by 3.2 percentage points. Unfortunately RYAAY wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); RYAAY investors were disappointed as the stock returned -39.2% during the same time period 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 Q1.
Disclosure: None. This article was originally published at Insider Monkey.