There are several ways to beat the market, and investing in small cap stocks has historically been one of them. We like to improve the odds of beating the market further by examining what famous hedge fund operators such as Jeff Ubben, George Soros and Carl Icahn think. Those hedge fund operators make billions of dollars each year by hiring the best and the brightest to do research on stocks, including small cap stocks that big brokerage houses simply don’t cover. Because of Carl Icahn and other elite funds’ exemplary historical records, we pay attention to their small cap picks. In this article, we use hedge fund filing data to analyze Range Resources Corp. (NYSE:RRC).
Hedge fund interest in Range Resources Corp. (NYSE:RRC) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare RRC to other stocks including The Descartes Systems Group Inc (NASDAQ:DSGX), BancorpSouth Bank (NYSE:BXS), and EnerSys (NYSE:ENS) to get a better sense of its popularity.
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 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Let’s review the new hedge fund action regarding Range Resources Corp. (NYSE:RRC).
What does the smart money think about Range Resources Corp. (NYSE:RRC)?
At Q1’s end, a total of 31 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the fourth quarter of 2018. The graph below displays the number of hedge funds with bullish position in RRC over the last 15 quarters. With the smart money’s capital changing hands, there exists a select group of noteworthy hedge fund managers who were upping their stakes significantly (or already accumulated large positions).
The largest stake in Range Resources Corp. (NYSE:RRC) was held by SailingStone Capital Partners, which reported holding $446.3 million worth of stock at the end of March. It was followed by Kopernik Global Investors with a $100.9 million position. Other investors bullish on the company included Millennium Management, Millennium Management, and D E Shaw.
Since Range Resources Corp. (NYSE:RRC) has faced declining sentiment from hedge fund managers, logic holds that there exists a select few funds that elected to cut their full holdings last quarter. At the top of the heap, Christian Leone’s Luxor Capital Group sold off the biggest stake of the “upper crust” of funds watched by Insider Monkey, worth close to $9.6 million in stock. Don Morgan’s fund, Brigade Capital, also sold off its stock, about $8.5 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Range Resources Corp. (NYSE:RRC) but similarly valued. These stocks are The Descartes Systems Group Inc (NASDAQ:DSGX), BancorpSouth Bank (NYSE:BXS), EnerSys (NYSE:ENS), and SkyWest, Inc. (NASDAQ:SKYW). All of these stocks’ market caps resemble RRC’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| DSGX | 10 | 80866 | -2 |
| BXS | 9 | 63199 | 0 |
| ENS | 20 | 83819 | -2 |
| SKYW | 13 | 166409 | 0 |
| Average | 13 | 98573 | -1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $99 million. That figure was $886 million in RRC’s case. EnerSys (NYSE:ENS) is the most popular stock in this table. On the other hand BancorpSouth Bank (NYSE:BXS) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Range Resources Corp. (NYSE:RRC) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately RRC wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on RRC were disappointed as the stock returned -30.5% during the same 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 13 of these stocks already outperformed the market in Q2.
Disclosure: None. This article was originally published at Insider Monkey.
