Is Rent-A-Center Inc (NASDAQ:RCII) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.
Rent-A-Center Inc (NASDAQ:RCII) shareholders have witnessed an increase in hedge fund interest lately. Rent-A-Center Inc (NASDAQ:RCII) was in 29 hedge funds’ portfolios at the end of June. The all time high for this statistic is 29. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 26 hedge funds in our database with RCII positions at the end of the first quarter. Our calculations also showed that RCII isn’t among the 30 most popular stocks among hedge funds (click for Q2 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. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.
Glenn Welling of Engaged Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 take a glance at the key hedge fund action surrounding Rent-A-Center Inc (NASDAQ:RCII).
Do Hedge Funds Think RCII Is A Good Stock To Buy Now?
At the end of June, a total of 29 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 12% from one quarter earlier. On the other hand, there were a total of 19 hedge funds with a bullish position in RCII a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Engaged Capital held the most valuable stake in Rent-A-Center Inc (NASDAQ:RCII), which was worth $125 million at the end of the second quarter. On the second spot was Renaissance Technologies which amassed $86.7 million worth of shares. Royce & Associates, Steamboat Capital Partners, and Capital Growth 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 Engaged Capital allocated the biggest weight to Rent-A-Center Inc (NASDAQ:RCII), around 9.68% of its 13F portfolio. Collaborative Holdings Management is also relatively very bullish on the stock, dishing out 7.54 percent of its 13F equity portfolio to RCII.
As one would reasonably expect, some big names were leading the bulls’ herd. Capital Growth Management, managed by Ken Heebner, created the biggest position in Rent-A-Center Inc (NASDAQ:RCII). Capital Growth Management had $17.8 million invested in the company at the end of the quarter. George McCabe’s Portolan Capital Management also made a $9.6 million investment in the stock during the quarter. The other funds with brand new RCII positions are Christopher Hillary’s Roubaix Capital, Steve Pei’s Gratia Capital, and Louis Navellier’s Navellier & Associates.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Rent-A-Center Inc (NASDAQ:RCII) but similarly valued. We will take a look at NewMarket Corporation (NYSE:NEU), Atlas Corp. (NYSE:ATCO), Focus Financial Partners Inc. (NASDAQ:FOCS), Mantech International Corp (NASDAQ:MANT), WD-40 Company (NASDAQ:WDFC), Lexington Realty Trust (NYSE:LXP), and NuVasive, Inc. (NASDAQ:NUVA). All of these stocks’ market caps are closest to RCII’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NEU | 19 | 119932 | 5 |
| ATCO | 18 | 1491399 | 6 |
| FOCS | 19 | 168334 | -4 |
| MANT | 12 | 22720 | -2 |
| WDFC | 17 | 150576 | 3 |
| LXP | 16 | 104285 | 4 |
| NUVA | 23 | 287292 | 3 |
| Average | 17.7 | 334934 | 2.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.7 hedge funds with bullish positions and the average amount invested in these stocks was $335 million. That figure was $386 million in RCII’s case. NuVasive, Inc. (NASDAQ:NUVA) is the most popular stock in this table. On the other hand Mantech International Corp (NASDAQ:MANT) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Rent-A-Center Inc (NASDAQ:RCII) is more popular among hedge funds. Our overall hedge fund sentiment score for RCII is 88. 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. 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 24.9% in 2021 through October 15th and still beat the market by 4.5 percentage points. Unfortunately RCII wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on RCII were disappointed as the stock returned 0.3% since the end of the second quarter (through 10/15) 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 most of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.
