Billionaire hedge fund managers such as Steve Cohen and Stan Druckenmiller can generate millions or even billions of dollars every year by pinning down high-potential small-cap stocks and pouring cash into these candidates. Small-cap stocks are overlooked by most investors, brokerage houses, and financial services hubs, while the unlimited research abilities of the big players within the hedge fund industry can easily identify the undervalued and high-potential stocks that reside the ignored corners of equity markets. There are numerous small-cap stocks that have turned out to be great winners, which is one of the main reasons the Insider Monkey team pays close attention to the hedge fund activity in relation to these stocks.
Regional Management Corp (NYSE:RM) was in 16 hedge funds’ portfolios at the end of the third quarter of 2016. RM investors should pay attention to an increase in support from the world’s most successful money managers of late. There were 13 hedge funds in our database with RM holdings 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 Skullcandy Inc (NASDAQ:SKUL), Southern Missouri Bancorp, Inc. (NASDAQ:SMBC), and Westmoreland Coal Company (NASDAQ:WLB) to gather more data points.
Follow Regional Management Corp. (NYSE:RM)
Follow Regional Management Corp. (NYSE:RM)
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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What have hedge funds been doing with Regional Management Corp (NYSE:RM)?
Heading into the fourth quarter of 2016, a total of 16 of the hedge funds tracked by Insider Monkey were long this stock, a 23% gain from the second quarter of 2016. Below, you can check out the change in hedge fund sentiment towards RM over the last 5 quarters, which shows hedge fund sentiment rebounding over the past 2 quarters. With hedgies’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Basswood Capital, led by Matthew Lindenbaum, holds the number one position in Regional Management Corp (NYSE:RM). Basswood Capital has a $21 million position in the stock, comprising 1% of its 13F portfolio. Coming in second is Second Curve Capital, led by Tom Brown, which holds a $20.6 million position; 11.8% of its 13F portfolio is allocated to the stock. Some other members of the smart money that hold long positions comprise Gregory Summe’s Glen Capital Partners, Phil Frohlich’s Prescott Group Capital Management, and J. Carlo Cannell’s Cannell Capital. 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.
As industry-wide interest jumped, key money managers have been driving this bullishness. Arrowstreet Capital, led by Peter Rathjens, Bruce Clarke and John Campbell, created the largest position in Regional Management Corp (NYSE:RM). Arrowstreet Capital had $1.4 million invested in the company at the end of the quarter. Glenn Russell Dubin’s Highbridge Capital Management also made a $0.5 million investment in the stock during the quarter. The other funds with new positions in the stock are Ken Griffin’s Citadel Investment Group and Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Regional Management Corp (NYSE:RM) but similarly valued. These stocks are Skullcandy Inc (NASDAQ:SKUL), Southern Missouri Bancorp, Inc. (NASDAQ:SMBC), Westmoreland Coal Company (NASDAQ:WLB), and Ardmore Shipping Corp (NYSE:ASC). This group of stocks’ market valuations are closest to RM’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SKUL | 10 | 3978 | -4 |
| SMBC | 2 | 3732 | -1 |
| WLB | 15 | 53157 | 3 |
| ASC | 10 | 12732 | 4 |
As you can see these stocks had an average of 9 hedge funds with bullish positions and the average amount invested in these stocks was $18 million. That figure was $81 million in RM’s case. Westmoreland Coal Company (NASDAQ:WLB) is the most popular stock in this table. On the other hand Southern Missouri Bancorp, Inc. (NASDAQ:SMBC) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks Regional Management Corp (NYSE:RM) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
Disclosure: None
