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Were Hedge Funds Right About James River Group (JRVR)?

We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).

In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 835 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 December 31st. In this article we look at what those investors think of James River Group Holdings Ltd (NASDAQ:JRVR).

James River Group Holdings Ltd (NASDAQ:JRVR) shares haven’t seen a lot of action during the fourth quarter. Overall, hedge fund sentiment was unchanged. The stock was in 10 hedge funds’ portfolios at the end of December. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Southside Bancshares, Inc. (NASDAQ:SBSI), Lakeland Financial Corporation (NASDAQ:LKFN), and TriCo Bancshares (NASDAQ:TCBK) to gather more data points. Our calculations also showed that JRVR isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).

David Harding

David Harding of Winton Capital Management

We leave no stone unturned when looking for the next great investment idea. For example, COVID-19 pandemic is still the main driver of stock prices. So we are checking out this trader’s corona catalyst trades. 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 S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to take a glance at the recent hedge fund action encompassing James River Group Holdings Ltd (NASDAQ:JRVR).

What does smart money think about James River Group Holdings Ltd (NASDAQ:JRVR)?

At Q4’s end, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. The graph below displays the number of hedge funds with bullish position in JRVR over the last 18 quarters. With hedge funds’ sentiment swirling, there exists a select group of key hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).

Is JRVR A Good Stock To Buy?

The largest stake in James River Group Holdings Ltd (NASDAQ:JRVR) was held by Renaissance Technologies, which reported holding $21.7 million worth of stock at the end of September. It was followed by Polar Capital with a $18.5 million position. Other investors bullish on the company included Royce & Associates, Winton Capital Management, and Two Sigma Advisors. In terms of the portfolio weights assigned to each position Winton Capital Management allocated the biggest weight to James River Group Holdings Ltd (NASDAQ:JRVR), around 0.17% of its 13F portfolio. Polar Capital is also relatively very bullish on the stock, setting aside 0.16 percent of its 13F equity portfolio to JRVR.

Due to the fact that James River Group Holdings Ltd (NASDAQ:JRVR) has faced a decline in interest from the smart money, it’s safe to say that there lies a certain “tier” of hedgies that decided to sell off their full holdings heading into Q4. Intriguingly, Richard Driehaus’s Driehaus Capital dumped the biggest position of the “upper crust” of funds followed by Insider Monkey, worth about $9.5 million in stock, and Ken Griffin’s Citadel Investment Group was right behind this move, as the fund cut about $0.6 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as James River Group Holdings Ltd (NASDAQ:JRVR) but similarly valued. These stocks are Southside Bancshares, Inc. (NASDAQ:SBSI), Lakeland Financial Corporation (NASDAQ:LKFN), TriCo Bancshares (NASDAQ:TCBK), and Patrick Industries, Inc. (NASDAQ:PATK). All of these stocks’ market caps are closest to JRVR’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SBSI 8 64172 1
LKFN 8 18831 -2
TCBK 11 44295 1
PATK 18 124804 1
Average 11.25 63026 0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 11.25 hedge funds with bullish positions and the average amount invested in these stocks was $63 million. That figure was $71 million in JRVR’s case. Patrick Industries, Inc. (NASDAQ:PATK) is the most popular stock in this table. On the other hand Southside Bancshares, Inc. (NASDAQ:SBSI) is the least popular one with only 8 bullish hedge fund positions. James River Group Holdings Ltd (NASDAQ:JRVR) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 1.0% in 2020 through May 1st but beat the market by 12.9 percentage points. Unfortunately JRVR wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); JRVR investors were disappointed as the stock returned -16.1% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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.

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