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 (10 coronavirus predictions).
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 take a look at whether Robert Half International Inc. (NYSE:RHI) is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Robert Half International Inc. (NYSE:RHI) shareholders have witnessed a decrease in hedge fund sentiment of late. RHI was in 23 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 24 hedge funds in our database with RHI holdings at the end of the previous quarter. Our calculations also showed that RHI 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).
If you’d ask most shareholders, hedge funds are assumed to be worthless, old financial tools of yesteryear. While there are over 8000 funds trading today, We choose to focus on the bigwigs of this group, about 850 funds. It is estimated that this group of investors manage the majority of all hedge funds’ total asset base, and by watching their top stock picks, Insider Monkey has determined various investment strategies that have historically outpaced the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy outstripped the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 35.3% since February 2017 (through March 3rd) even though the market was up more than 35% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
Matthew Hulsizer of PEAK6 Capital
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. 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 take a look at the fresh hedge fund action encompassing Robert Half International Inc. (NYSE:RHI).
How are hedge funds trading Robert Half International Inc. (NYSE:RHI)?
At Q4’s end, a total of 23 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -4% from the third quarter of 2019. The graph below displays the number of hedge funds with bullish position in RHI over the last 18 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Cliff Asness’s AQR Capital Management has the largest position in Robert Half International Inc. (NYSE:RHI), worth close to $318.4 million, amounting to 0.4% of its total 13F portfolio. Coming in second is Citadel Investment Group, led by Ken Griffin, holding a $82 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Remaining hedge funds and institutional investors that are bullish contain Noam Gottesman’s GLG Partners, John Overdeck and David Siegel’s Two Sigma Advisors and Dmitry Balyasny’s Balyasny Asset Management. In terms of the portfolio weights assigned to each position Scoggin allocated the biggest weight to Robert Half International Inc. (NYSE:RHI), around 1.66% of its 13F portfolio. AQR Capital Management is also relatively very bullish on the stock, designating 0.36 percent of its 13F equity portfolio to RHI.
Since Robert Half International Inc. (NYSE:RHI) has witnessed declining sentiment from the smart money, it’s safe to say that there exists a select few funds that slashed their full holdings in the third quarter. Intriguingly, Paul Marshall and Ian Wace’s Marshall Wace LLP dropped the largest investment of the “upper crust” of funds watched by Insider Monkey, valued at close to $14.8 million in stock, and Matthew Tewksbury’s Stevens Capital Management was right behind this move, as the fund cut about $3.1 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest dropped by 1 funds in the third quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Robert Half International Inc. (NYSE:RHI) but similarly valued. These stocks are Gentex Corporation (NASDAQ:GNTX), Steel Dynamics, Inc. (NASDAQ:STLD), 10x Genomics, Inc. (NASDAQ:TXG), and Donaldson Company, Inc. (NYSE:DCI). All of these stocks’ market caps are closest to RHI’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| GNTX | 32 | 616430 | -1 |
| STLD | 35 | 506217 | 6 |
| TXG | 12 | 172329 | -7 |
| DCI | 21 | 175314 | -3 |
| Average | 25 | 367573 | -1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 25 hedge funds with bullish positions and the average amount invested in these stocks was $368 million. That figure was $550 million in RHI’s case. Steel Dynamics, Inc. (NASDAQ:STLD) is the most popular stock in this table. On the other hand 10x Genomics, Inc. (NASDAQ:TXG) is the least popular one with only 12 bullish hedge fund positions. Robert Half International Inc. (NYSE:RHI) 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 22.3% in 2020 through March 16th but beat the market by 3.2 percentage points. Unfortunately RHI wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); RHI investors were disappointed as the stock returned -30.8% 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 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in Q1.
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.
