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Range Resources Corp. (RRC): Hedge Funds Taking Some Chips Off The Table

In this article we will check out the progression of hedge fund sentiment towards Range Resources Corp. (NYSE:RRC) 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.

Range Resources Corp. (NYSE:RRC) has seen a decrease in enthusiasm from smart money lately. Our calculations also showed that RRC isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 58 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

Phill Gross of Adage Capital Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s take a gander at the recent hedge fund action encompassing Range Resources Corp. (NYSE:RRC).

Hedge fund activity in Range Resources Corp. (NYSE:RRC)

Heading into the second quarter of 2020, a total of 23 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -21% from the previous quarter. By comparison, 31 hedge funds held shares or bullish call options in RRC a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Range Resources Corp. (NYSE:RRC) was held by SailingStone Capital Partners, which reported holding $70.8 million worth of stock at the end of September. It was followed by Kopernik Global Investors with a $28.4 million position. Other investors bullish on the company included Contrarius Investment Management, Adage Capital Management, and Fisher Asset Management. In terms of the portfolio weights assigned to each position SailingStone Capital Partners allocated the biggest weight to Range Resources Corp. (NYSE:RRC), around 39.67% of its 13F portfolio. Kopernik Global Investors is also relatively very bullish on the stock, dishing out 6.05 percent of its 13F equity portfolio to RRC.

Due to the fact that Range Resources Corp. (NYSE:RRC) has witnessed falling interest from hedge fund managers, it’s easy to see that there lies a certain “tier” of hedge funds that elected to cut their positions entirely in the first quarter. Intriguingly, Robert Pitts’s Steadfast Capital Management sold off the biggest investment of the 750 funds tracked by Insider Monkey, totaling close to $9.5 million in stock. Steve Cohen’s fund, Point72 Asset Management, also said goodbye to its stock, about $5.4 million worth. These moves are interesting, as total hedge fund interest dropped by 6 funds in the first quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Range Resources Corp. (NYSE:RRC) but similarly valued. These stocks are Revlon Inc (NYSE:REV), Kforce Inc. (NASDAQ:KFRC), Petmed Express Inc (NASDAQ:PETS), and Redwood Trust, Inc. (NYSE:RWT). This group of stocks’ market caps are similar to RRC’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
REV 36 178239 -2
KFRC 15 46137 -7
PETS 18 112993 -1
RWT 22 66955 9
Average 22.75 101081 -0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 22.75 hedge funds with bullish positions and the average amount invested in these stocks was $101 million. That figure was $154 million in RRC’s case. Revlon Inc (NYSE:REV) is the most popular stock in this table. On the other hand Kforce Inc. (NASDAQ:KFRC) is the least popular one with only 15 bullish hedge fund positions. Range Resources Corp. (NYSE:RRC) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.9% in 2020 through June 10th but still beat the market by 14.2 percentage points. Hedge funds were also right about betting on RRC as the stock returned 202.6% in Q2 (through June 10th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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Disclosure: None. This article was originally published at Insider Monkey.