Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Republic Services, Inc. (NYSE:RSG).
Republic Services, Inc. (NYSE:RSG) shareholders have witnessed an increase in hedge fund interest recently. RSG was in 31 hedge funds’ portfolios at the end of the third quarter of 2019. There were 24 hedge funds in our database with RSG positions at the end of the previous quarter. Our calculations also showed that RSG isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
To most market participants, hedge funds are perceived as worthless, outdated investment tools of yesteryear. While there are greater than 8000 funds in operation at present, We choose to focus on the bigwigs of this group, about 750 funds. Most estimates calculate that this group of people direct the lion’s share of all hedge funds’ total capital, and by shadowing their inimitable stock picks, Insider Monkey has formulated various investment strategies that have historically surpassed the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy defeated the S&P 500 short ETFs by around 20 percentage points annually since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
Richard Chilton of Chilton Investment Company
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. We’re going to take a peek at the latest hedge fund action regarding Republic Services, Inc. (NYSE:RSG).
How have hedgies been trading Republic Services, Inc. (NYSE:RSG)?
At Q3’s end, a total of 31 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 29% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards RSG over the last 17 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, AQR Capital Management held the most valuable stake in Republic Services, Inc. (NYSE:RSG), which was worth $157.6 million at the end of the third quarter. On the second spot was GAMCO Investors which amassed $130.9 million worth of shares. Chilton Investment Company, Two Sigma Advisors, and Marshall Wace 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 Chilton Investment Company allocated the biggest weight to Republic Services, Inc. (NYSE:RSG), around 3.02% of its portfolio. Wallace Capital Management is also relatively very bullish on the stock, setting aside 1.62 percent of its 13F equity portfolio to RSG.
Now, specific money managers have jumped into Republic Services, Inc. (NYSE:RSG) headfirst. Renaissance Technologies, created the most valuable position in Republic Services, Inc. (NYSE:RSG). Renaissance Technologies had $20.3 million invested in the company at the end of the quarter. Alec Litowitz and Ross Laser’s Magnetar Capital also made a $2.7 million investment in the stock during the quarter. The other funds with new positions in the stock are Michael Gelband’s ExodusPoint Capital, Matthew Tewksbury’s Stevens Capital Management, and Benjamin A. Smith’s Laurion Capital Management.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Republic Services, Inc. (NYSE:RSG) but similarly valued. These stocks are Chunghwa Telecom Co., Ltd (NYSE:CHT), Eversource Energy (NYSE:ES), Mercadolibre Inc (NASDAQ:MELI), and CRH PLC (NYSE:CRH). This group of stocks’ market valuations match RSG’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CHT | 5 | 117483 | 2 |
| ES | 19 | 739026 | -2 |
| MELI | 45 | 3156793 | -7 |
| CRH | 9 | 129764 | 2 |
| Average | 19.5 | 1035767 | -1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.5 hedge funds with bullish positions and the average amount invested in these stocks was $1036 million. That figure was $625 million in RSG’s case. Mercadolibre Inc (NASDAQ:MELI) is the most popular stock in this table. On the other hand Chunghwa Telecom Co., Ltd (NYSE:CHT) is the least popular one with only 5 bullish hedge fund positions. Republic Services, Inc. (NYSE:RSG) 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 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately RSG wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on RSG were disappointed as the stock returned 2.4% during the fourth quarter (through the end of November) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.
