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. We at Insider Monkey have gone over 835 13F filings that hedge funds and prominent 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 funds think of RBC Bearings Incorporated (NASDAQ:ROLL) based on that data.
Is RBC Bearings Incorporated (NASDAQ:ROLL) ready to rally soon? Investors who are in the know are getting more optimistic. The number of long hedge fund bets went up by 3 recently. Our calculations also showed that ROLL 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).
Today there are several metrics shareholders can use to analyze stocks. Some of the less known metrics are hedge fund and insider trading sentiment. We have shown that, historically, those who follow the top picks of the top money managers can outpace their index-focused peers by a solid amount (see the details here).
Paul Tudor Jones of Tudor Investment Corp
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. 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. Keeping this in mind let’s take a glance at the new hedge fund action surrounding RBC Bearings Incorporated (NASDAQ:ROLL).
Hedge fund activity in RBC Bearings Incorporated (NASDAQ:ROLL)
Heading into the first quarter of 2020, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 43% from the third quarter of 2019. By comparison, 6 hedge funds held shares or bullish call options in ROLL a year ago. With hedgies’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Chuck Royce’s Royce & Associates has the largest position in RBC Bearings Incorporated (NASDAQ:ROLL), worth close to $44.5 million, accounting for 0.4% of its total 13F portfolio. The second most bullish fund manager is Citadel Investment Group, led by Ken Griffin, holding a $0.9 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors that are bullish comprise Cliff Asness’s AQR Capital Management, Michael Gelband’s ExodusPoint Capital and Donald Sussman’s Paloma Partners. In terms of the portfolio weights assigned to each position Royce & Associates allocated the biggest weight to RBC Bearings Incorporated (NASDAQ:ROLL), around 0.4% of its 13F portfolio. Weld Capital Management is also relatively very bullish on the stock, dishing out 0.07 percent of its 13F equity portfolio to ROLL.
Consequently, key money managers have jumped into RBC Bearings Incorporated (NASDAQ:ROLL) headfirst. Citadel Investment Group, managed by Ken Griffin, initiated the largest position in RBC Bearings Incorporated (NASDAQ:ROLL). Citadel Investment Group had $0.9 million invested in the company at the end of the quarter. Michael Gelband’s ExodusPoint Capital also made a $0.6 million investment in the stock during the quarter. The other funds with brand new ROLL positions are Minhua Zhang’s Weld Capital Management, Paul Tudor Jones’s Tudor Investment Corp, and Mika Toikka’s AlphaCrest Capital Management.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as RBC Bearings Incorporated (NASDAQ:ROLL) but similarly valued. We will take a look at TriNet Group Inc (NYSE:TNET), Tenet Healthcare Corp (NYSE:THC), LendingTree, Inc (NASDAQ:TREE), and Blueprint Medicines Corporation (NASDAQ:BPMC). This group of stocks’ market valuations are similar to ROLL’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TNET | 20 | 388310 | -1 |
| THC | 34 | 1170950 | 8 |
| TREE | 26 | 104147 | 3 |
| BPMC | 37 | 786766 | 10 |
| Average | 29.25 | 612543 | 5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 29.25 hedge funds with bullish positions and the average amount invested in these stocks was $613 million. That figure was $49 million in ROLL’s case. Blueprint Medicines Corporation (NASDAQ:BPMC) is the most popular stock in this table. On the other hand TriNet Group Inc (NYSE:TNET) is the least popular one with only 20 bullish hedge fund positions. Compared to these stocks RBC Bearings Incorporated (NASDAQ:ROLL) is even less popular than TNET. Hedge funds dodged a bullet by taking a bearish stance towards ROLL. Our calculations showed that the top 20 most popular hedge fund stocks returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 13.0% in 2020 through April 6th but managed to beat the market by 4.2 percentage points. Unfortunately ROLL wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); ROLL investors were disappointed as the stock returned -25.7% 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 20 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in 2020.
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.
