The equity market returns were very disappointing in the third quarter, “thanks” to the slowdown of China’s economy and the weaker-than-expected U.S. economic data. It was not entirely clear whether the broader market sell-off made U.S. equity valuations undervalued, but it definitely made them more attractive. It is worth mentioning that Russell 2000 ETF (IWM) underperformed the broad-market S&P 500 ETF by more than 14 percentage points during the period of June 25, 2015 through October 30, 2015. This clearly points to the fact that most investors, including hedge fund firms and institutional investors, heavily cut their exposure to high-potential (but seemingly riskier) small-cap stocks during the bloody third quarter. So let’s take a glance at the smart money sentiment towards Ritchie Bros. Auctioneers (USA) (NYSE:RBA) and see how it was affected.
Ritchie Bros. Auctioneers (USA) (NYSE:RBA) was in 24 hedge funds’ portfolios at the end of the third quarter of 2015. RBA shareholders have witnessed an increase in activity from the world’s largest hedge funds in recent months. There were 15 hedge funds in our database with RBA positions at the end of the previous quarter. At the end of this article we will also compare RBA to other stocks including Boston Beer Co Inc (NYSE:SAM), Landstar System, Inc. (NASDAQ:LSTR), and Vector Group Ltd (NYSE:VGR) to get a better sense of its popularity.
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In the financial world there are plenty of tools market participants have at their disposal to appraise stocks. A couple of the most underrated tools are hedge fund and insider trading moves. Our researchers have shown that, historically, those who follow the best picks of the elite investment managers can outclass the broader indices by a solid amount (see the details here).
With all of this in mind, let’s view the latest action surrounding Ritchie Bros. Auctioneers (USA) (NYSE:RBA).
Hedge fund activity in Ritchie Bros. Auctioneers (USA) (NYSE:RBA)
Heading into Q4, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 60% from the previous quarter. With hedge funds’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Royce & Associates, managed by Chuck Royce, holds the most valuable position in Ritchie Bros. Auctioneers (USA) (NYSE:RBA). Royce & Associates has a $185 million position in the stock, comprising 1% of its 13F portfolio. On Royce & Associates’s heels is Gotham Asset Management, managed by Joel Greenblatt, which holds a $41 million position; 0.4% of its 13F portfolio is allocated to the stock. Other members of the smart money that are bullish contain D. E. Shaw’s D E Shaw, Israel Englander’s Millennium Management and Cliff Asness’s AQR Capital Management.
As one would reasonably expect, key hedge funds have been driving this bullishness. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, established the most outsized position in Ritchie Bros. Auctioneers (USA) (NYSE:RBA). Marshall Wace LLP had $3.6 million invested in the company at the end of the quarter. John Overdeck and David Siegel’s Two Sigma Advisors also made a $2.4 million investment in the stock during the quarter. The following funds were also among the new RBA investors: David Costen Haley’s HBK Investments, Chao Ku’s Nine Chapters Capital Management, and Ken Gray and Steve Walsh’s Bryn Mawr Capital.
Let’s go over hedge fund activity in other stocks similar to Ritchie Bros. Auctioneers (USA) (NYSE:RBA) on the next page.
These stocks are Boston Beer Co Inc (NYSE:SAM), Landstar System, Inc. (NASDAQ:LSTR), Vector Group Ltd (NYSE:VGR), and DCP Midstream Partners, LP (NYSE:DPM). This group of stocks’ market caps resemble RBA’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SAM | 24 | 271005 | -3 |
| LSTR | 19 | 222178 | -2 |
| VGR | 17 | 233591 | -2 |
| DPM | 10 | 14338 | 5 |
As you can see these stocks had an average of 17.5 hedge funds with bullish positions and the average amount invested in these stocks was $185 million. That figure was $278 million in RBA’s case. Boston Beer Co Inc (NYSE:SAM) is the most popular stock in this table. On the other hand DCP Midstream Partners, LP (NYSE:DPM) is the least popular one with only 10 bullish hedge fund positions. Ritchie Bros. Auctioneers (USA) (NYSE:RBA) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal which in combination with the total number of funds long the stock increasing makes RBA worthy of a closer look.
