RR Donnelley & Sons Co (RRD): Hedge Funds Aren’t Crazy About It, Insider Sentiment Unchanged

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In the eyes of many market players, hedge funds are seen as overrated, outdated investment tools of an era lost to time. Although there are over 8,000 hedge funds in operation in present day, this site looks at the top tier of this club, close to 525 funds. It is assumed that this group controls the lion’s share of all hedge funds’ total capital, and by monitoring their highest quality investments, we’ve found a few investment strategies that have historically outstripped Mr. Market. Our small-cap hedge fund strategy outperformed the S&P 500 index by 18 percentage points a year for a decade in our back tests, and since we’ve started sharing our picks with our subscribers at the end of August 2012, we have trumped the S&P 500 index by 33 percentage points in 11 months (find the details here).

RR Donnelley & Sons Co (NASDAQ:RRD)

Just as necessary, bullish insider trading activity is a second way to analyze the marketplace. There are plenty of incentives for a bullish insider to get rid of shares of his or her company, but only one, very obvious reason why they would initiate a purchase. Many academic studies have demonstrated the market-beating potential of this method if piggybackers understand what to do (learn more here).

What’s more, it’s important to analyze the latest info surrounding RR Donnelley & Sons Co (NASDAQ:RRD).

How are hedge funds trading RR Donnelley & Sons Co (NASDAQ:RRD)?

Heading into Q3, a total of 20 of the hedge funds we track were bullish in this stock, a change of -13% from the first quarter. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were upping their stakes considerably.

According to our 13F database, Tiger Global Management LLC, managed by Chase Coleman and Feroz Dewan, holds the most valuable position in RR Donnelley & Sons Co (NASDAQ:RRD). Tiger Global Management LLC has a $49 million position in the stock, comprising 0.9% of its 13F portfolio. Coming in second is Ron Gutfleish of Elm Ridge Capital, with a $37 million position; the fund has 4.4% of its 13F portfolio invested in the stock. Some other peers that hold long positions include Philippe Laffont’s Coatue Management, Cliff Asness’s AQR Capital Management and Phill Gross and Robert Atchinson’s Adage Capital Management.

As RR Donnelley & Sons Co (NASDAQ:RRD) has faced declining interest from upper-tier hedge fund managers, we can see that there lies a certain “tier” of hedgies that slashed their entire stakes last quarter. Intriguingly, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital cut the largest position of the “upper crust” of funds we monitor, totaling close to $5.8 million in stock, and Neil Chriss of Hutchin Hill Capital was right behind this move, as the fund cut about $4.1 million worth. These transactions are important to note, as total hedge fund interest dropped by 3 funds last quarter.

What have insiders been doing with RR Donnelley & Sons Co (NASDAQ:RRD)?

Insider buying is best served when the company we’re looking at has seen transactions within the past half-year. Over the latest half-year time frame, RR Donnelley & Sons Co (NASDAQ:RRD) has seen zero unique insiders purchasing, and zero insider sales (see the details of insider trades here).

We’ll also examine the relationship between both of these indicators in other stocks similar to RR Donnelley & Sons Co (NASDAQ:RRD). These stocks are HMS Holdings Corp. (NASDAQ:HMSY), Ritchie Bros. Auctioneers (USA) (NYSE:RBA), Deluxe Corporation (NYSE:DLX), Portfolio Recovery Associates, Inc. (NASDAQ:PRAA), and Lender Processing Services, Inc. (NYSE:LPS). This group of stocks belong to the business services industry and their market caps match RRD’s market cap.

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