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 (read our latest 10 coronavirus predictions).
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 Raymond James Financial, Inc. (NYSE:RJF) in this article.
Raymond James Financial, Inc. (NYSE:RJF) has experienced a decrease in enthusiasm from smart money of late. Our calculations also showed that RJF isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
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 we’re going to review the latest hedge fund action encompassing Raymond James Financial, Inc. (NYSE:RJF).
What does smart money think about Raymond James Financial, Inc. (NYSE:RJF)?
At the end of the fourth quarter, a total of 28 of the hedge funds tracked by Insider Monkey were long this stock, a change of -3% from one quarter earlier. On the other hand, there were a total of 25 hedge funds with a bullish position in RJF a year ago. With hedge funds’ capital changing hands, there exists a few noteworthy hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
More specifically, Brave Warrior Capital was the largest shareholder of Raymond James Financial, Inc. (NYSE:RJF), with a stake worth $214.4 million reported as of the end of September. Trailing Brave Warrior Capital was Eminence Capital, which amassed a stake valued at $203.8 million. Fisher Asset Management, East Side Capital (RR Partners), and Millennium 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 Brave Warrior Capital allocated the biggest weight to Raymond James Financial, Inc. (NYSE:RJF), around 11.33% of its 13F portfolio. East Side Capital (RR Partners) is also relatively very bullish on the stock, designating 5.78 percent of its 13F equity portfolio to RJF.
Judging by the fact that Raymond James Financial, Inc. (NYSE:RJF) has faced declining sentiment from the entirety of the hedge funds we track, it’s easy to see that there was a specific group of hedgies that decided to sell off their positions entirely in the third quarter. Intriguingly, Donald Sussman’s Paloma Partners sold off the biggest investment of the 750 funds monitored by Insider Monkey, comprising close to $2 million in stock, and Ken Griffin’s Citadel Investment Group was right behind this move, as the fund dropped about $1.4 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest fell by 1 funds in the third quarter.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Raymond James Financial, Inc. (NYSE:RJF) but similarly valued. These stocks are Slack Technologies Inc (NYSE:WORK), Ubiquiti Inc. (NYSE:UI), China Eastern Airlines Corp. Ltd. (NYSE:CEA), and Cna Financial Corporation (NYSE:CNA). This group of stocks’ market caps match RJF’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| WORK | 29 | 294837 | 0 |
| UI | 25 | 301453 | 6 |
| CEA | 1 | 578 | 0 |
| CNA | 15 | 82549 | -1 |
| Average | 17.5 | 169854 | 1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.5 hedge funds with bullish positions and the average amount invested in these stocks was $170 million. That figure was $751 million in RJF’s case. Slack Technologies Inc (NYSE:WORK) is the most popular stock in this table. On the other hand China Eastern Airlines Corp. Ltd. (NYSE:CEA) is the least popular one with only 1 bullish hedge fund positions. Raymond James Financial, Inc. (NYSE:RJF) 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 22.3% in 2020 through March 16th but beat the market by 3.2 percentage points. Unfortunately RJF wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on RJF were disappointed as the stock returned -25.6% 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.
Disclosure: None. This article was originally published at Insider Monkey.
