At Insider Monkey, we pore over the filings of more than 700 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of September 30. In this article, we will use that wealth of knowledge to determine whether or not Reliance Steel & Aluminum (NYSE:RS) makes for a good investment right now.
Reliance Steel & Aluminum (NYSE:RS) shareholders have witnessed a decrease in hedge fund interest lately. At the end of this article we will also compare RS to other stocks including Tesoro Logistics LP (NYSE:TLLP), Copart, Inc. (NASDAQ:CPRT), and Ryder System, Inc. (NYSE:R) to get a better sense of its popularity.
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In the eyes of most market participants, hedge funds are perceived as slow, outdated financial vehicles of yesteryear. While there are over an 8000 funds trading at present, Our researchers hone in on the aristocrats of this club, about 700 funds. These hedge fund managers preside over the lion’s share of all hedge funds’ total asset base, and by paying attention to their finest picks, Insider Monkey has determined various investment strategies that have historically outperformed Mr. Market. Insider Monkey’s small-cap hedge fund strategy outpaced the S&P 500 index by 12 percentage points a year for a decade in their back tests.
With all of this in mind, we’re going to analyze the latest action surrounding Reliance Steel & Aluminum (NYSE:RS).
What does the smart money think about Reliance Steel & Aluminum (NYSE:RS)?
Heading into Q4, a total of 21 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -9% from one quarter earlier. With hedge funds’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Chuck Royce’s Royce & Associates has the biggest position in Reliance Steel & Aluminum (NYSE:RS), worth close to $169.9 million, comprising 0.9% of its total 13F portfolio. The second most bullish fund manager is Adage Capital Management, led by Phill Gross and Robert Atchinson, holding a $150.6 million position; 0.4% of its 13F portfolio is allocated to the stock. Some other peers with similar optimism include Cliff Asness’ AQR Capital Management, Jorge Paulo Lemann’s 3G Capital and D E Shaw.
Due to the fact that Reliance Steel & Aluminum (NYSE:RS) has witnessed a declination in interest from the entirety of the hedge funds we track, it’s safe to say that there were a few fund managers who sold off their full holdings heading into Q4. Interestingly, Clint Carlson’s Carlson Capital sold off the largest stake of all the hedgies watched by Insider Monkey, totaling close to $25.7 million in stock, and Glenn Russell Dubin’s Highbridge Capital Management was right behind this move, as the fund said goodbye to about $10.6 million worth. These transactions are important to note, as total hedge fund interest was cut by 2 funds heading into Q4.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Reliance Steel & Aluminum (NYSE:RS) but similarly valued. We will take a look at Tesoro Logistics LP (NYSE:TLLP), Copart, Inc. (NASDAQ:CPRT), Ryder System, Inc. (NYSE:R), and FLIR Systems, Inc. (NASDAQ:FLIR). This group of stocks’ market valuations match RS’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TLLP | 9 | 13028 | 3 |
| CPRT | 34 | 634165 | 0 |
| R | 29 | 297045 | -3 |
| FLIR | 26 | 213275 | 6 |
As you can see these stocks had an average of 24.5 hedge funds with bullish positions and the average amount invested in these stocks was $289 million. That figure was $523 million in RS’s case. Copart, Inc. (NASDAQ:CPRT) is the most popular stock in this table. On the other hand Tesoro Logistics LP (NYSE:TLLP) is the least popular one with only 9 bullish hedge fund positions. Reliance Steel & Aluminum (NYSE:RS) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard CPRT might be a better candidate to consider a long position.
