Revlon Inc (REV) vs. Top 20 Hedge Fund Stocks in 2019

While the market driven by short-term sentiment influenced by the accomodative interest rate environment in the US, increasing oil prices and deteriorating expectations towards the resolution of the trade war with China, many smart money investors kept their cautious approach regarding the current bull run in the third quarter and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Revlon Inc (NYSE:REV) and see how the stock performed in comparison to hedge funds’ consensus picks.

Revlon Inc (NYSE:REV) was in 33 hedge funds’ portfolios at the end of September. REV shareholders have witnessed an increase in enthusiasm from smart money recently. There were 31 hedge funds in our database with REV holdings at the end of the previous quarter. Our calculations also showed that REV isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).

In the financial world there are numerous methods investors employ to analyze their stock investments. Some of the most useful methods are hedge fund and insider trading sentiment. We have shown that, historically, those who follow the best picks of the best fund managers can beat their index-focused peers by a healthy amount (see the details here).

Richard Pzena - Pzena Investment Management

Richard S. Pzena of Pzena Investment Management

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock is still extremely cheap despite already gaining 20 percent. With all of this in mind let’s view the fresh hedge fund action regarding Revlon Inc (NYSE:REV).

How have hedgies been trading Revlon Inc (NYSE:REV)?

Heading into the fourth quarter of 2019, a total of 33 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 6% from the second quarter of 2019. On the other hand, there were a total of 26 hedge funds with a bullish position in REV a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Pzena Investment Management was the largest shareholder of Revlon Inc (NYSE:REV), with a stake worth $34.2 million reported as of the end of September. Trailing Pzena Investment Management was SCW Capital Management, which amassed a stake valued at $29.2 million. Endurant Capital Management, Park West Asset Management, and Litespeed Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position SCW Capital Management allocated the biggest weight to Revlon Inc (NYSE:REV), around 25.15% of its 13F portfolio. Litespeed Management is also relatively very bullish on the stock, earmarking 17.79 percent of its 13F equity portfolio to REV.

Consequently, specific money managers have been driving this bullishness. GLG Partners, managed by Noam Gottesman, created the most outsized position in Revlon Inc (NYSE:REV). GLG Partners had $6.6 million invested in the company at the end of the quarter. Lawrence Hawkins’s Prosight Capital also made a $3.7 million investment in the stock during the quarter. The other funds with brand new REV positions are Israel Englander’s Millennium Management, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, and David E. Shaw’s D E Shaw.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Revlon Inc (NYSE:REV) but similarly valued. We will take a look at Hawaiian Holdings, Inc. (NASDAQ:HA), Kornit Digital Ltd. (NASDAQ:KRNT), Arbor Realty Trust, Inc. (NYSE:ABR), and Meta Financial Group Inc. (NASDAQ:CASH). This group of stocks’ market valuations resemble REV’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
HA 11 82372 0
KRNT 12 53869 -1
ABR 12 99896 -2
CASH 14 127610 2
Average 12.25 90937 -0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 12.25 hedge funds with bullish positions and the average amount invested in these stocks was $91 million. That figure was $230 million in REV’s case. Meta Financial Group Inc. (NASDAQ:CASH) is the most popular stock in this table. On the other hand Hawaiian Holdings, Inc. (NASDAQ:HA) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Revlon Inc (NYSE:REV) is more popular among hedge funds. 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. Unfortunately REV wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on REV were disappointed as the stock returned -15% in 2019 and trailed 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 65 percent of these stocks outperformed the market in 2019.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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