Hedge Funds Are Betting On James River Group Holdings Ltd (JRVR)

Hedge fund managers like David Einhorn, Dan Loeb, or Carl Icahn became billionaires through reaping large profits for their investors, which is why piggybacking their stock picks may provide us with significant returns as well. Many hedge funds, like Paul Singer’s Elliott Management, are pretty secretive, but we can still get some insights by analyzing their quarterly 13F filings. One of the most fertile grounds for large abnormal returns is hedge funds’ most popular small-cap picks, which are not so widely followed and often trade at a discount to their intrinsic value. In this article we will check out hedge fund activity in another small-cap stock: James River Group Holdings Ltd (NASDAQ:JRVR) .

James River Group Holdings Ltd (NASDAQ:JRVR) has experienced an increase in enthusiasm from smart money in recent months. There were 9 hedge funds in our database with JRVR positions at the end of the previous quarter. 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 Amicus Therapeutics, Inc. (NASDAQ:FOLD), Atlantic Tele-Network, Inc. (NASDAQ:ATNI), and Callidus Software Inc. (NASDAQ:CALD) to gather more data points.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

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Now, we’re going to go over the recent action surrounding James River Group Holdings Ltd (NASDAQ:JRVR).

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

Heading into the fourth quarter of 2016, a total of 12 of the hedge funds tracked by Insider Monkey were long this stock, a change of 33% from the previous quarter. The graph below displays the number of hedge funds with bullish position in JRVR over the last 5 quarters. With hedgies’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were upping their holdings considerably (or already accumulated large positions).

Of the funds tracked by Insider Monkey, D E Shaw, one of the biggest hedge funds in the world, holds the number one position in James River Group Holdings Ltd (NASDAQ:JRVR). D E Shaw has a $508.5 million position in the stock, comprising 0.9% of its 13F portfolio. The second most bullish fund manager is Arrowstreet Capital, led by Peter Rathjens, Bruce Clarke and John Campbell, which holds a $4.1 million position; less than 0.1% of its 13F portfolio is allocated to the company. Other peers that are bullish comprise Dmitry Balyasny’s Balyasny Asset Management, Daniel Lascano’s Lomas Capital Management and Renaissance Technologies, led by Jim Simons. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

Consequently, specific money managers were leading the bulls’ herd. Lomas Capital Management, led by Daniel Lascano, established the most outsized position in James River Group Holdings Ltd (NASDAQ:JRVR). Lomas Capital Management had $3.7 million invested in the company at the end of the quarter. Glenn Russell Dubin’s Highbridge Capital Management also initiated a $0.8 million position during the quarter. The only other fund with a new position in the stock is Millennium Management, led by Israel Englander.

Let’s now review hedge fund activity in other stocks similar to James River Group Holdings Ltd (NASDAQ:JRVR). These stocks are Amicus Therapeutics, Inc. (NASDAQ:FOLD), Atlantic Tele-Network, Inc. (NASDAQ:ATNI), Callidus Software Inc. (NASDAQ:CALD), and Gran Tierra Energy Inc. (NYSEAMEX:GTE). All of these stocks’ market caps resemble JRVR’s market cap.

As you can see these stocks had an average of 17.75 hedge funds with bullish positions and the average amount invested in these stocks was $192 million. That figure was $528 million in JRVR’s case. Amicus Therapeutics, Inc. (NASDAQ:FOLD) is the most popular stock in this table. On the other hand Atlantic Tele-Network, Inc. (NASDAQ:ATNI) is the least popular one with only 10 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. In this regard FOLD might be a better candidate to consider taking a long position in.