Hedge Funds Are Selling RR Donnelley & Sons Co (RRD)

Investing in hedge funds can bring large profits, but it’s not for everybody, since hedge funds are available only for high-net-worth individuals. They generate significant returns for investors to justify their large fees and they allocate a lot of time and employ a complex analysis to determine the best stocks to invest in. A particularly interesting group of stocks that hedge funds like is the small-caps. The huge amount of capital does not allow hedge funds to invest a lot in small-caps, but our research showed that their most popular small-cap ideas are less efficiently priced and generate stronger returns than their large- and mega-cap picks and the broader market. That is why we follow the hedge fund activity in the small-cap space.

RR Donnelley & Sons Co (NYSE:RRD) was in 24 hedge funds’ portfolios at the end of the third quarter of 2016. RRD investors should pay attention to a decrease in activity from the world’s largest hedge funds recently. There were 25 hedge funds in our database with RRD 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 Finisar Corporation (NASDAQ:FNSR), American National Insurance Company (NASDAQ:ANAT), and Cabot Corp (NYSE:CBT) 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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With all of this in mind, we’re going to view the latest action regarding RR Donnelley & Sons Co (NYSE:RRD).

How are hedge funds trading RR Donnelley & Sons Co (NYSE:RRD)?

At the end of the third quarter, a total of 24 of the hedge funds tracked by Insider Monkey were bullish on this stock, down 4% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards RRD over the last 5 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, AQR Capital Management, led by Cliff Asness, holds the biggest position in RR Donnelley & Sons Co (NYSE:RRD). According to regulatory filings, the fund has a $29.7 million position in the stock, comprising less than 0.1%% of its 13F portfolio. The second most bullish fund manager is Skybridge Capital, led by Anthony Scaramucciá, which holds a $13.6 million position; the fund has 3.1% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors with similar optimism encompass John Overdeck and David Siegel’s Two Sigma Advisors, Ron Gutfleish’s Elm Ridge Capital and D. E. Shaw’s D E Shaw. We should note that Elm Ridge Capital is 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.

Now that we’ve mentioned the most bullish investors, let’s also take a look at some funds that sold off their entire stakes in the stock during the third quarter. Interestingly, Ray Carroll’s Breton Hill Capital sold off the biggest position of the 700 funds monitored by Insider Monkey, valued at close to $8.4 million in stock, and Israel Englander’s Millennium Management was right behind this move, as the fund dumped about $7.5 million worth of RR Donnelley & Sons Co (NYSE:RRD) shares.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as RR Donnelley & Sons Co (NYSE:RRD) but similarly valued. These stocks are Finisar Corporation (NASDAQ:FNSR), American National Insurance Company (NASDAQ:ANAT), Cabot Corp (NYSE:CBT), and Outfront Media Inc (NYSE:OUT). This group of stocks’ market values match RRD’s market value.

As you can see these stocks had an average of 18 hedge funds with bullish positions and the average amount invested in these stocks was $217 million. That figure was $132 million in RRD’s case. Finisar Corporation (NASDAQ:FNSR) is the most popular stock in this table. On the other hand American National Insurance Company (NASDAQ:ANAT) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks RR Donnelley & Sons Co (NYSE:RRD) 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.