Amid an overall bull market, many stocks that smart money investors were collectively bullish on surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. That’s why we weren’t surprised when hedge funds’ top 20 large-cap stock picks generated a return of 37.4% through the end of November and outperformed the broader market benchmark by 9.9 percentage points.This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.
Revlon Inc (NYSE:REV) was in 33 hedge funds’ portfolios at the end of September. REV investors should pay attention to an increase in activity from the world’s largest hedge funds lately. There were 31 hedge funds in our database with REV holdings at the end of the previous quarter. Our calculations also showed that REV 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.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Jamie Zimmerman of Litespeed Management
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 go over the new hedge fund action surrounding Revlon Inc (NYSE:REV).
How are hedge funds trading Revlon Inc (NYSE:REV)?
At the end of the third quarter, a total of 33 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 6% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in REV over the last 17 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).
More specifically, Pzena Investment Management was the largest shareholder of Revlon Inc (NYSE:REV), with a stake worth $34.2 million reported as of the end of September. Trailing Pzena Investment Management was SCW Capital Management, which amassed a stake valued at $29.2 million. Endurant Capital Management, Park West Asset Management, and Litespeed Management 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 SCW Capital Management allocated the biggest weight to Revlon Inc (NYSE:REV), around 25.15% of its portfolio. Litespeed Management is also relatively very bullish on the stock, designating 17.79 percent of its 13F equity portfolio to REV.
As industrywide interest jumped, some big names have jumped into Revlon Inc (NYSE:REV) headfirst. GLG Partners, managed by Noam Gottesman, created the largest position in Revlon Inc (NYSE:REV). GLG Partners had $6.6 million invested in the company at the end of the quarter. Lawrence Hawkins’s Prosight Capital also made a $3.7 million investment in the stock during the quarter. The other funds with new positions in the stock are Israel Englander’s Millennium Management, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, and David E. Shaw’s D E Shaw.
Let’s go over hedge fund activity in other stocks similar to Revlon Inc (NYSE:REV). We will take a look at Hawaiian Holdings, Inc. (NASDAQ:HA), Kornit Digital Ltd. (NASDAQ:KRNT), Arbor Realty Trust, Inc. (NYSE:ABR), and Meta Financial Group Inc. (NASDAQ:CASH). This group of stocks’ market values resemble REV’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HA | 11 | 82372 | 0 |
| KRNT | 12 | 53869 | -1 |
| ABR | 12 | 99896 | -2 |
| CASH | 14 | 127610 | 2 |
| Average | 12.25 | 90937 | -0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.25 hedge funds with bullish positions and the average amount invested in these stocks was $91 million. That figure was $230 million in REV’s case. Meta Financial Group Inc. (NASDAQ:CASH) is the most popular stock in this table. On the other hand Hawaiian Holdings, Inc. (NASDAQ:HA) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Revlon Inc (NYSE:REV) is more popular among hedge funds. 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 REV wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on REV were disappointed as the stock returned 5.6% during the first two months of the fourth quarter 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 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
