Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 750 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Regis Corporation (NYSE:RGS).
Is Regis Corporation (NYSE:RGS) an excellent stock to buy now? The best stock pickers are taking a bearish view. The number of long hedge fund bets were trimmed by 1 in recent months. Our calculations also showed that RGS isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Jim Simons of Renaissance Technologies
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. We’re going to review the new hedge fund action regarding Regis Corporation (NYSE:RGS).
How are hedge funds trading Regis Corporation (NYSE:RGS)?
Heading into the fourth quarter of 2019, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -7% from one quarter earlier. On the other hand, there were a total of 15 hedge funds with a bullish position in RGS a year ago. With hedgies’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
The largest stake in Regis Corporation (NYSE:RGS) was held by Birch Run Capital, which reported holding $215.4 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $44.5 million position. Other investors bullish on the company included First Pacific Advisors, D E Shaw, and Arrowstreet Capital. In terms of the portfolio weights assigned to each position Birch Run Capital allocated the biggest weight to Regis Corporation (NYSE:RGS), around 65.07% of its 13F portfolio. First Pacific Advisors is also relatively very bullish on the stock, designating 0.07 percent of its 13F equity portfolio to RGS.
Due to the fact that Regis Corporation (NYSE:RGS) has witnessed bearish sentiment from the smart money, it’s easy to see that there were a few funds who sold off their entire stakes heading into Q4. At the top of the heap, Brian Gustavson and Andrew Haley’s 1060 Capital Management cut the biggest stake of the “upper crust” of funds followed by Insider Monkey, worth close to $8 million in stock. Alec Litowitz and Ross Laser’s fund, Magnetar Capital, also sold off its stock, about $0.6 million worth. These transactions are intriguing to say the least, as total hedge fund interest was cut by 1 funds heading into Q4.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Regis Corporation (NYSE:RGS) but similarly valued. We will take a look at Live Oak Bancshares Inc (NASDAQ:LOB), Glu Mobile Inc. (NASDAQ:GLUU), Arvinas, Inc. (NASDAQ:ARVN), and CBTX, Inc. (NASDAQ:CBTX). This group of stocks’ market values match RGS’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| LOB | 10 | 36893 | 4 |
| GLUU | 22 | 87877 | -1 |
| ARVN | 11 | 140075 | -2 |
| CBTX | 7 | 9568 | 0 |
| Average | 12.5 | 68603 | 0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.5 hedge funds with bullish positions and the average amount invested in these stocks was $69 million. That figure was $290 million in RGS’s case. Glu Mobile Inc. (NASDAQ:GLUU) is the most popular stock in this table. On the other hand CBTX, Inc. (NASDAQ:CBTX) is the least popular one with only 7 bullish hedge fund positions. Regis Corporation (NYSE:RGS) is not the most popular stock in this group but hedge fund interest is still above average. 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 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately RGS wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on RGS were disappointed as the stock returned -20.2% during the fourth quarter (through the end of November) 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 many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.
