In this article we will check out the progression of hedge fund sentiment towards Royal Caribbean Cruises Ltd. (NYSE:RCL) 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.
Hedge fund interest in Royal Caribbean Cruises Ltd. (NYSE:RCL) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that RCL isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings). At the end of this article we will also compare RCL to other stocks including Dover Corporation (NYSE:DOV), Caesars Entertainment Inc. (NASDAQ:CZR), and Xylem Inc (NYSE:XYL) to get a better sense of its popularity.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 185.4% since March 2017 and outperformed the S&P 500 ETFs by more than 79 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Stuart Zimmer of Zimmer Partners
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, artificial intelligence is one of the fastest-growing industries right now, so we are checking out stock pitches like this emerging AI stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind we’re going to review the latest hedge fund action encompassing Royal Caribbean Cruises Ltd. (NYSE:RCL).
Do Hedge Funds Think RCL Is A Good Stock To Buy Now?
At Q2’s end, a total of 42 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the first quarter of 2020. On the other hand, there were a total of 31 hedge funds with a bullish position in RCL a year ago. With hedgies’ sentiment swirling, there exists a few key hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).
More specifically, Citadel Investment Group was the largest shareholder of Royal Caribbean Cruises Ltd. (NYSE:RCL), with a stake worth $176.3 million reported as of the end of June. Trailing Citadel Investment Group was Citadel Investment Group, which amassed a stake valued at $107.4 million. Columbus Hill Capital Management, Zimmer Partners, and Candlestick Capital 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 Columbus Hill Capital Management allocated the biggest weight to Royal Caribbean Cruises Ltd. (NYSE:RCL), around 6.45% of its 13F portfolio. Proem Advisors is also relatively very bullish on the stock, setting aside 4.69 percent of its 13F equity portfolio to RCL.
Due to the fact that Royal Caribbean Cruises Ltd. (NYSE:RCL) has experienced bearish sentiment from hedge fund managers, logic holds that there was a specific group of fund managers who sold off their full holdings in the second quarter. It’s worth mentioning that Matthew L Pinz’s Pinz Capital sold off the largest stake of the 750 funds followed by Insider Monkey, worth an estimated $4.8 million in stock. Greg Eisner’s fund, Engineers Gate Manager, also cut its stock, about $3.9 million worth. These bearish behaviors are intriguing to say the least, as total 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 Royal Caribbean Cruises Ltd. (NYSE:RCL) but similarly valued. We will take a look at Dover Corporation (NYSE:DOV), Caesars Entertainment Inc. (NASDAQ:CZR), Xylem Inc (NYSE:XYL), Fox Corporation (NASDAQ:FOXA), PPL Corporation (NYSE:PPL), 10x Genomics, Inc. (NASDAQ:TXG), and PT Telekomunikasi Indonesia (NYSE:TLK). This group of stocks’ market valuations are closest to RCL’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| DOV | 29 | 700034 | 3 |
| CZR | 73 | 1839888 | -3 |
| XYL | 23 | 931677 | 0 |
| FOXA | 35 | 441270 | -3 |
| PPL | 23 | 417630 | -2 |
| TXG | 28 | 1447446 | 5 |
| TLK | 5 | 108737 | 1 |
| Average | 30.9 | 840955 | 0.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 30.9 hedge funds with bullish positions and the average amount invested in these stocks was $841 million. That figure was $597 million in RCL’s case. Caesars Entertainment Inc. (NASDAQ:CZR) is the most popular stock in this table. On the other hand PT Telekomunikasi Indonesia (NYSE:TLK) is the least popular one with only 5 bullish hedge fund positions. Royal Caribbean Cruises Ltd. (NYSE:RCL) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for RCL is 56.4. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 22.9% in 2021 through October 1st and still beat the market by 5.6 percentage points. Hedge funds were also right about betting on RCL as the stock returned 8.3% since the end of Q2 (through 10/1) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Follow Royal Caribbean Cruises Ltd (NYSE:RCL)
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Disclosure: None. This article was originally published at Insider Monkey.
