Hedge fund movements in a particular stock signals a growth potential and Remy International, Inc. (NASDAQ:REMY) is the latest example of it. Rehan Jaffer’s H Partners Management went activist on the company in mid-October last year with a 8.75% stake in the company. The investment manager came to an agreement with Remy International to observe all the meetings of the board of directors of the company as a non-voting observer. At this moment, the details regarding the role of the investment manager are not disclosed in public, but it is a positive signal for investors who track hedge fund managers.
The stock of Remy International, Inc. (NASDAQ:REMY) gained 42% after BorgWarner Inc. (NYSE:BWA) announced the acquisition of the electrical components company. According to the deal, BorgWarner will pay $29.50 for every share of Remy International and the total enterprise value of the deal, including debt, is kept at $1.2 billion.
BorgWarner is known for its efficient powertrain technology and the company has an expertise in manufacturing components for powertrain applications including engine-timing systems. While announcing the acquisition, James Verrier, CEO and President of BorgWarner Inc. (NYSE:BWA), said in a statement, “We look forward to welcoming Remy’s talented employees to BorgWarner. Their products and capabilities will strengthen BorgWarner’s position in the rapidly developing powertrain electrification trend.”
A similar sentiment was echoed in a statement from Remy International, Inc. (NASDAQ:REMY), in which CEO Jay Pittas said, “Our products and capabilities should complement BorgWarner very well and support growing vehicle electrification trends.”
Remy International’s stock has grown by 46.19% year-to-date and the smart money have maintained a bullish outlook on the electrical component manufacturer right from the first quarter with 23 hedge funds holding positions worth $151.12 million against prior quarter’s value of $94.79 million from 11 hedge funds.
At Insider Monkey, we track hedge funds’ moves in order to identify actionable patterns and profit from them. Our research has shown that hedge funds’ large-cap stock picks historically delivered a monthly alpha of six basis points, though these stocks underperformed the S&P 500 Total Return Index by an average of seven basis points per month between 1999 and 2012. On the other hand, the 15 most popular small-cap stocks among hedge funds outperformed the S&P 500 Index by an average of 95 basis points per month (read the details here). Since the official launch of our small-cap strategy in August 2012, it has performed just as predicted, returning over 135% and beating the market by more than 80 percentage points. We believe the data is clear: investors will be better off by focusing on small-cap stocks utilizing hedge fund expertise rather than large-cap stocks.
In terms of insider activity, Remy International has not witnessed any transactions in 2015. With all of this in mind, let’s view the key action regarding Remy International, Inc. (NASDAQ:REMY).
How have hedgies been trading Remy International, Inc. (NASDAQ:REMY)?
As the the number of investors with long positions in Remy International went up during the first quarter, let’s take a look at some of the largest shareholders of the company. Among the funds we track, the aforementioned H Partners Management holds the largest position in Remy International Inc (NASDAQ:REMY), which contains 2.80 million shares, followed by Cove Street Capital, managed by Jeffrey Bronchick, holding 867,400 shares. Other investors bullish on the stock include Tom Sandell’s Sandell Asset Management, Larry Robbins’ Glenview Capital and Jonathon Jacobson’s Highfields Capital Management, all of which initiated stakes during the first three months of 2015. Sandell Asset Management disclosed ownership of 772,400 shares, while Glenview Capital and Highfields Capital hold 499,800 shares and 357,500 shares respectively.
This shows that as the bullish sentiment surrounding Remy International went up during the first quarter, investors anticipated a positive development for the company, which supports the idea of why it is important to follow the hedge fund activity.
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