We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Keeping this in mind let’s see whether Renewable Energy Group Inc (NASDAQ:REGI) represents a good buying opportunity at the moment. Let’s quickly check the hedge fund interest towards the company. Hedge fund firms constantly search out bright intellectuals and highly-experienced employees and throw away millions of dollars on satellite photos and other research activities, so it is no wonder why they tend to generate millions in profits each year. It is also true that some hedge fund players fail inconceivably on some occasions, but net net their stock picks have been generating superior risk-adjusted returns on average over the years.
Is Renewable Energy Group Inc (NASDAQ:REGI) going to take off soon? The best stock pickers are betting on the stock. The number of long hedge fund positions improved by 5 in recent months. Our calculations also showed that REGI isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings). REGI was in 21 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 16 hedge funds in our database with REGI holdings at the end of the previous quarter.
Bruce Kovner of Caxton Associates LP
We leave no stone unturned when looking for the next great investment idea. For example, this investor can predict short term winners following earnings announcements with high accuracy, so we check out his stock picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s view the key hedge fund action encompassing Renewable Energy Group Inc (NASDAQ:REGI).
How have hedgies been trading Renewable Energy Group Inc (NASDAQ:REGI)?
Heading into the first quarter of 2020, a total of 21 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 31% from the previous quarter. By comparison, 18 hedge funds held shares or bullish call options in REGI a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Parsifal Capital Management was the largest shareholder of Renewable Energy Group Inc (NASDAQ:REGI), with a stake worth $54.3 million reported as of the end of September. Trailing Parsifal Capital Management was Rubric Capital Management, which amassed a stake valued at $35.2 million. Arosa Capital Management, Lansdowne Partners, and Citadel Investment Group were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Parsifal Capital Management allocated the biggest weight to Renewable Energy Group Inc (NASDAQ:REGI), around 13.54% of its 13F portfolio. Arosa Capital Management is also relatively very bullish on the stock, setting aside 6.94 percent of its 13F equity portfolio to REGI.
As one would reasonably expect, some big names have jumped into Renewable Energy Group Inc (NASDAQ:REGI) headfirst. Parsifal Capital Management, managed by David Zorub, assembled the most valuable position in Renewable Energy Group Inc (NASDAQ:REGI). Parsifal Capital Management had $54.3 million invested in the company at the end of the quarter. George Baxter’s Sabrepoint Capital also initiated a $14.4 million position during the quarter. The other funds with new positions in the stock are Jerome L. Simon’s Lonestar Capital Management, Bruce Kovner’s Caxton Associates LP, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Renewable Energy Group Inc (NASDAQ:REGI) but similarly valued. These stocks are CNX Midstream Partners LP (NYSE:CNXM), MSG Networks Inc (NYSE:MSGN), Nabors Industries Ltd. (NYSE:NBR), and Bitauto Hldg Ltd (NYSE:BITA). This group of stocks’ market caps resemble REGI’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CNXM | 5 | 19604 | -1 |
| MSGN | 28 | 304873 | -6 |
| NBR | 21 | 148138 | 1 |
| BITA | 15 | 127794 | 1 |
| Average | 17.25 | 150102 | -1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.25 hedge funds with bullish positions and the average amount invested in these stocks was $150 million. That figure was $223 million in REGI’s case. MSG Networks Inc (NYSE:MSGN) is the most popular stock in this table. On the other hand CNX Midstream Partners LP (NYSE:CNXM) is the least popular one with only 5 bullish hedge fund positions. Renewable Energy Group Inc (NASDAQ:REGI) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 1.0% in 2020 through May 1st but beat the market by 12.9 percentage points. Unfortunately REGI wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on REGI were disappointed as the stock returned -14.4% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
