Hedge Funds Are Piling Into Revlon Inc (REV)

We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Melvin Capital’s recent GameStop losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Revlon Inc (NYSE:REV).

Is Revlon Inc (NYSE:REV) going to take off soon? Investors who are in the know were taking a bullish view. The number of long hedge fund bets inched up by 9 in recent months. Revlon Inc (NYSE:REV) was in 42 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic was previously 38. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that REV isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 33 hedge funds in our database with REV holdings at the end of March.

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.

Ryan Tolkin, CIO of Schonfeld Strategic Advisors

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, artificial intelligence is one of the fastest-growing industries right now, so we are checking out stock pitches like this emerging AI 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 gander at the fresh hedge fund action surrounding Revlon Inc (NYSE:REV).

Do Hedge Funds Think REV Is A Good Stock To Buy Now?

At the end of the second quarter, a total of 42 of the hedge funds tracked by Insider Monkey were long this stock, a change of 27% from the previous quarter. On the other hand, there were a total of 34 hedge funds with a bullish position in REV a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to Insider Monkey’s hedge fund database, Richard S. Pzena’s Pzena Investment Management has the number one position in Revlon Inc (NYSE:REV), worth close to $58.5 million, corresponding to 0.2% of its total 13F portfolio. The second largest stake is held by Millennium Management, led by Israel Englander, holding a $47.9 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors that are bullish include Amish Mehta’s SQN Investors, Kevin Oram and Peter Uddo’s Praesidium Investment Management Company and Will Cook’s Sunriver Management. In terms of the portfolio weights assigned to each position SCW Capital Management allocated the biggest weight to Revlon Inc (NYSE:REV), around 12.29% of its 13F portfolio. Sunriver Management is also relatively very bullish on the stock, designating 5.53 percent of its 13F equity portfolio to REV.

Now, key hedge funds were breaking ground themselves. Sunriver Management, managed by Will Cook, assembled the biggest position in Revlon Inc (NYSE:REV). Sunriver Management had $32.5 million invested in the company at the end of the quarter. Kamran Moghtaderi’s Eversept Partners also initiated a $17.1 million position during the quarter. The following funds were also among the new REV investors: Israel Englander’s Millennium Management, Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors, and Lawrence Hawkins’s Prosight Capital.

Let’s check out hedge fund activity in other stocks similar to Revlon Inc (NYSE:REV). These stocks are MeiraGTx Holdings plc (NASDAQ:MGTX), Gamco Investors Inc. (NYSE:GBL), Evolus, Inc. (NASDAQ:EOLS), Digi International Inc. (NASDAQ:DGII), Duluth Holdings Inc. (NASDAQ:DLTH), Clene Inc. (NASDAQ:CLNN), and SeaSpine Holdings Corp (NASDAQ:SPNE). This group of stocks’ market valuations are closest to REV’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 8.6 hedge funds with bullish positions and the average amount invested in these stocks was $64 million. That figure was $439 million in REV’s case. SeaSpine Holdings Corp (NASDAQ:SPNE) is the most popular stock in this table. On the other hand Clene Inc. (NASDAQ:CLNN) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Revlon Inc (NYSE:REV) is more popular among hedge funds. Our overall hedge fund sentiment score for REV is 90. 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 22.9% in 2021 through October 1st and still beat the market by 5.6 percentage points. Unfortunately REV wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on REV were disappointed as the stock returned -20.6% since the end of the second quarter (through 10/1) 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.

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