Concerns over rising interest rates and expected further rate increases have hit several stocks hard since the end of the third quarter. NASDAQ and Russell 2000 indices are already in correction territory. More importantly, Russell 2000 ETF (IWM) underperformed the larger S&P 500 ETF (SPY) by about 4 percentage points in the first half of the fourth quarter. Hedge funds and institutional investors tracked by Insider Monkey usually invest a disproportionate amount of their portfolios in smaller cap stocks. We have been receiving indications that hedge funds were paring back their overall exposure and this is one of the factors behind the recent movements in major indices. In this article, we will take a closer look at hedge fund sentiment towards Rayonier Inc. (NYSE:RYN).
Rayonier Inc. (NYSE:RYN) has experienced an increase in activity from the world’s largest hedge funds in recent months. RYN was in 17 hedge funds’ portfolios at the end of September. There were 16 hedge funds in our database with RYN holdings at the end of the previous quarter. Our calculations also showed that ryn isn’t among the 30 most popular stocks among hedge funds.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
We’re going to take a peek at the latest hedge fund action regarding Rayonier Inc. (NYSE:RYN).
How have hedgies been trading Rayonier Inc. (NYSE:RYN)?
At Q3’s end, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 6% from the second quarter of 2018. By comparison, 14 hedge funds held shares or bullish call options in RYN heading into this year. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Renaissance Technologies was the largest shareholder of Rayonier Inc. (NYSE:RYN), with a stake worth $105.5 million reported as of the end of September. Trailing Renaissance Technologies was Third Avenue Management, which amassed a stake valued at $80.2 million. Impax Asset Management, Millennium Management, and Arrowstreet Capital were also very fond of the stock, giving the stock large weights in their portfolios.
As industrywide interest jumped, specific money managers were leading the bulls’ herd. BlueCrest Capital Mgmt., managed by Michael Platt and William Reeves, initiated the most outsized position in Rayonier Inc. (NYSE:RYN). BlueCrest Capital Mgmt. had $1.1 million invested in the company at the end of the quarter. David Costen Haley’s HBK Investments also made a $0.5 million investment in the stock during the quarter. The following funds were also among the new RYN investors: Frederick DiSanto’s Ancora Advisors and Matthew Hulsizer’s PEAK6 Capital Management.
Let’s check out hedge fund activity in other stocks similar to Rayonier Inc. (NYSE:RYN). These stocks are Emcor Group Inc (NYSE:EME), Proto Labs Inc (NYSE:PRLB), The Scotts Miracle-Gro Company (NYSE:SMG), and Graphic Packaging Holding Company (NYSE:GPK). This group of stocks’ market caps resemble RYN’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| EME | 20 | 231394 | 3 |
| PRLB | 5 | 11266 | -3 |
| SMG | 23 | 280789 | 2 |
| GPK | 25 | 771297 | -2 |
| Average | 18.25 | 323687 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.25 hedge funds with bullish positions and the average amount invested in these stocks was $324 million. That figure was $303 million in RYN’s case. Graphic Packaging Holding Company (NYSE:GPK) is the most popular stock in this table. On the other hand Proto Labs Inc (NYSE:PRLB) is the least popular one with only 5 bullish hedge fund positions. Rayonier Inc. (NYSE:RYN) 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. In this regard GPK might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
