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. Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 835 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about Ryder System, Inc. (NYSE:R) in this article.
Is Ryder System, Inc. (NYSE:R) undervalued? Prominent investors are getting more bullish. The number of long hedge fund positions rose by 1 recently. Our calculations also showed that R 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). R was in 23 hedge funds’ portfolios at the end of December. There were 22 hedge funds in our database with R holdings at the end of the previous quarter.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 41 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
Jonathan Barrett of Luminus Management
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. With all of this in mind we’re going to take a look at the new hedge fund action regarding Ryder System, Inc. (NYSE:R).
How are hedge funds trading Ryder System, Inc. (NYSE:R)?
Heading into the first quarter of 2020, a total of 23 of the hedge funds tracked by Insider Monkey were long this stock, a change of 5% from the previous quarter. On the other hand, there were a total of 19 hedge funds with a bullish position in R a year ago. With hedgies’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
More specifically, Pzena Investment Management was the largest shareholder of Ryder System, Inc. (NYSE:R), with a stake worth $177.3 million reported as of the end of September. Trailing Pzena Investment Management was Luminus Management, which amassed a stake valued at $48.2 million. Scopus Asset Management, Balyasny Asset Management, and Arrowstreet Capital 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 Luminus Management allocated the biggest weight to Ryder System, Inc. (NYSE:R), around 2.01% of its 13F portfolio. Scopus Asset Management is also relatively very bullish on the stock, dishing out 1.01 percent of its 13F equity portfolio to R.
As industrywide interest jumped, specific money managers have been driving this bullishness. Scopus Asset Management, managed by Alexander Mitchell, created the largest position in Ryder System, Inc. (NYSE:R). Scopus Asset Management had $31 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also made a $27.4 million investment in the stock during the quarter. The following funds were also among the new R investors: Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors, Louis Bacon’s Moore Global Investments, and Ray Dalio’s Bridgewater Associates.
Let’s check out hedge fund activity in other stocks similar to Ryder System, Inc. (NYSE:R). We will take a look at Grocery Outlet Holding Corp. (NASDAQ:GO), Guangshen Railway Co. Ltd (NYSE:GSH), Diodes Incorporated (NASDAQ:DIOD), and Navistar International Corp (NYSE:NAV). This group of stocks’ market caps are similar to R’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| GO | 14 | 78999 | -1 |
| GSH | 1 | 4453 | -2 |
| DIOD | 18 | 79913 | -5 |
| NAV | 27 | 1172047 | 3 |
| Average | 15 | 333853 | -1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $334 million. That figure was $348 million in R’s case. Navistar International Corp (NYSE:NAV) is the most popular stock in this table. On the other hand Guangshen Railway Co. Ltd (NYSE:GSH) is the least popular one with only 1 bullish hedge fund positions. Ryder System, Inc. (NYSE:R) 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but beat the market by 5.5 percentage points. Unfortunately R wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on R were disappointed as the stock returned -50% 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 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.
