In this article we will take a look at whether hedge funds think Royal Caribbean Group (NYSE:RCL) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Is Royal Caribbean Group (NYSE:RCL) a worthy investment today? Prominent investors were in a bullish mood. The number of bullish hedge fund bets increased by 5 lately. Royal Caribbean Group (NYSE:RCL) was in 42 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 52. Our calculations also showed that RCL isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 S&P 500 ETFs by 115 percentage points since March 2017 (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.
John Rogers of Ariel Investments
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation, which is why we are checking out this inflation play. We go through lists like 10 best gold stocks to buy to identify promising stocks. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Now we’re going to view the key hedge fund action surrounding Royal Caribbean Group (NYSE:RCL).
Do Hedge Funds Think RCL Is A Good Stock To Buy Now?
At Q1’s end, a total of 42 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 14% from the previous quarter. On the other hand, there were a total of 25 hedge funds with a bullish position in RCL a year ago. With hedge funds’ capital changing hands, there exists a few key hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).
More specifically, D E Shaw was the largest shareholder of Royal Caribbean Group (NYSE:RCL), with a stake worth $173.4 million reported as of the end of March. Trailing D E Shaw was Citadel Investment Group, which amassed a stake valued at $115 million. Candlestick Capital Management, Ariel Investments, and Columbus Hill Capital Management 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 Columbus Hill Capital Management allocated the biggest weight to Royal Caribbean Group (NYSE:RCL), around 5.08% of its 13F portfolio. Proem Advisors is also relatively very bullish on the stock, setting aside 4.14 percent of its 13F equity portfolio to RCL.
As industrywide interest jumped, some big names were leading the bulls’ herd. Candlestick Capital Management, managed by Jack Woodruff, established the largest position in Royal Caribbean Group (NYSE:RCL). Candlestick Capital Management had $76.8 million invested in the company at the end of the quarter. Kevin D. Eng’s Columbus Hill Capital Management also initiated a $41.8 million position during the quarter. The other funds with new positions in the stock are Steve Cohen’s Point72 Asset Management, Joseph Samuels’s Islet Management, and Brandon Haley’s Holocene Advisors.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Royal Caribbean Group (NYSE:RCL) but similarly valued. These stocks are Hess Corporation (NYSE:HES), Cloudflare, Inc. (NYSE:NET), Fresenius Medical Care AG & Co. KGaA (NYSE:FMS), CarMax Inc (NYSE:KMX), Kellogg Company (NYSE:K), Futu Holdings Limited (NASDAQ:FUTU), and Genmab A/S (NASDAQ:GMAB). All of these stocks’ market caps are similar to RCL’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HES | 26 | 556388 | -7 |
| NET | 45 | 792469 | -15 |
| FMS | 12 | 10933 | 3 |
| KMX | 46 | 2030896 | 0 |
| K | 32 | 557204 | -5 |
| FUTU | 26 | 1014997 | 9 |
| GMAB | 13 | 113947 | -3 |
| Average | 28.6 | 725262 | -2.6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 28.6 hedge funds with bullish positions and the average amount invested in these stocks was $725 million. That figure was $594 million in RCL’s case. CarMax Inc (NYSE:KMX) is the most popular stock in this table. On the other hand Fresenius Medical Care AG & Co. KGaA (NYSE:FMS) is the least popular one with only 12 bullish hedge fund positions. Royal Caribbean Group (NYSE:RCL) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for RCL is 78.3. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 17.4% in 2021 through June 18th and beat the market again by 6.1 percentage points. Unfortunately RCL wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on RCL were disappointed as the stock returned 0% since the end of March (through 6/18) 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 many of these stocks already outperformed the market since 2019.
Follow Royal Caribbean Cruises Ltd (NYSE:RCL)
Follow Royal Caribbean Cruises Ltd (NYSE:RCL)
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Disclosure: None. This article was originally published at Insider Monkey.
