Was The Smart Money Right About Revlon Inc (REV)?

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 867 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of September 30th, when the S&P 500 Index was trading around the 4300 level. Since then investors decided to bet on the economic recovery and a stock market rebound even though we experienced a temporary correction in January. In this article you are going to find out whether hedge funds thought Revlon Inc (NYSE:REV) was a good investment heading into the fourth quarter and how the stock traded in comparison to the top hedge fund picks.

Is Revlon Inc (NYSE:REV) going to take off soon? Investors who are in the know were in a bearish mood. The number of long hedge fund bets were trimmed by 11 lately. Revlon Inc (NYSE:REV) was in 31 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 42. Our calculations also showed that REV isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so 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. With all of this in mind we’re going to take a look at the fresh hedge fund action regarding Revlon Inc (NYSE:REV).

Do Hedge Funds Think REV Is A Good Stock To Buy Now?

At the end of the third quarter, a total of 31 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -26% from one quarter earlier. By comparison, 32 hedge funds held shares or bullish call options in REV a year ago. So, let’s review 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 $62.2 million reported as of the end of September. Trailing Pzena Investment Management was Sunriver Management, which amassed a stake valued at $51 million. SQN Investors, Point72 Asset Management, and Praesidium Investment Management Company 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 14.2% of its 13F portfolio. Sunriver Management is also relatively very bullish on the stock, designating 8.11 percent of its 13F equity portfolio to REV.

Since Revlon Inc (NYSE:REV) has faced bearish sentiment from the smart money, it’s easy to see that there was a specific group of hedge funds that decided to sell off their full holdings last quarter. It’s worth mentioning that Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital cut the largest stake of all the hedgies monitored by Insider Monkey, worth close to $4.9 million in stock, and Lawrence Hawkins’s Prosight Capital was right behind this move, as the fund said goodbye to about $3.8 million worth. These bearish behaviors are important to note, as total hedge fund interest dropped by 11 funds last quarter.

Let’s go over 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 EverQuote, Inc. (NASDAQ:EVER), INDUS Realty Trust, Inc. (NASDAQ:INDT), Universal Logistics Holdings, Inc. (NASDAQ:ULH), Centrus Energy Corp. (NYSE:LEU), Zenvia Inc. (NASDAQ:ZENV), Vaccitech plc (NASDAQ:VACC), and Beazer Homes USA, Inc. (NYSE:BZH). This group of stocks’ market caps are closest to REV’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 8.9 hedge funds with bullish positions and the average amount invested in these stocks was $37 million. That figure was $437 million in REV’s case. EverQuote, Inc. (NASDAQ:EVER) is the most popular stock in this table. On the other hand Centrus Energy Corp. (NYSE:LEU) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks Revlon Inc (NYSE:REV) is more popular among hedge funds. Our overall hedge fund sentiment score for REV is 66.1. 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 29.6% in 2021 and still beat the market by 3.6 percentage points. Unfortunately, REV wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on REV were disappointed as the stock returned -2.1% since the end of the third quarter (through 1/31) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as all of these stocks already outperformed the market since 2019.

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