Concerns over rising interest rates and expected further rate increases have hit several stocks hard during the fourth quarter of 2018. Trends reversed 180 degrees in 2019 amid Powell’s pivot and optimistic expectations towards a trade deal with China. Hedge funds and institutional investors tracked by Insider Monkey usually invest a disproportionate amount of their portfolios in smaller cap stocks. We have been receiving indications that hedge funds were increasing their overall exposure in the third quarter and this is one of the factors behind the recent movements in major indices. In this article, we will take a closer look at hedge fund sentiment towards Revolve Group, Inc. (NYSE:RVLV).
Revolve Group, Inc. (NYSE:RVLV) shareholders have witnessed a decrease in enthusiasm from smart money lately. RVLV was in 14 hedge funds’ portfolios at the end of the third quarter of 2019. There were 15 hedge funds in our database with RVLV holdings at the end of the previous quarter. Our calculations also showed that RVLV isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 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 has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
New York Stock Exchange
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. Let’s analyze the key hedge fund action regarding Revolve Group, Inc. (NYSE:RVLV).
How have hedgies been trading Revolve Group, Inc. (NYSE:RVLV)?
At Q3’s end, a total of 14 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -7% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in RVLV over the last 17 quarters. So, let’s see 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, Whale Rock Capital Management, managed by Alex Sacerdote, holds the number one position in Revolve Group, Inc. (NYSE:RVLV). Whale Rock Capital Management has a $13.4 million position in the stock, comprising 0.2% of its 13F portfolio. On Whale Rock Capital Management’s heels is James Woodson Davis of Woodson Capital Management, with a $10.5 million position; the fund has 1.6% of its 13F portfolio invested in the stock. Other professional money managers that are bullish include Ken Griffin’s Citadel Investment Group, Andrew Sandler’s Sandler Capital Management and Parvinder Thiara’s Athanor Capital. In terms of the portfolio weights assigned to each position Woodson Capital Management allocated the biggest weight to Revolve Group, Inc. (NYSE:RVLV), around 1.64% of its 13F portfolio. Sandler Capital Management is also relatively very bullish on the stock, designating 0.37 percent of its 13F equity portfolio to RVLV.
Due to the fact that Revolve Group, Inc. (NYSE:RVLV) has faced bearish sentiment from the entirety of the hedge funds we track, we can see that there were a few fund managers that slashed their positions entirely by the end of the third quarter. Interestingly, Jeffrey Talpins’s Element Capital Management cut the largest position of all the hedgies tracked by Insider Monkey, worth about $4.7 million in stock. Anand Parekh’s fund, Alyeska Investment Group, also dumped its stock, about $3.4 million worth. These bearish behaviors are important to note, as total hedge fund interest dropped by 1 funds by the end of the third quarter.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Revolve Group, Inc. (NYSE:RVLV) but similarly valued. These stocks are Dycom Industries, Inc. (NYSE:DY), Corcept Therapeutics Incorporated (NASDAQ:CORT), Newmark Group, Inc. (NASDAQ:NMRK), and NBT Bancorp Inc. (NASDAQ:NBTB). This group of stocks’ market values match RVLV’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| DY | 17 | 56809 | 0 |
| CORT | 18 | 135196 | 1 |
| NMRK | 19 | 111199 | 3 |
| NBTB | 6 | 7606 | -2 |
| Average | 15 | 77703 | 0.5 |
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 $78 million. That figure was $50 million in RVLV’s case. Newmark Group, Inc. (NASDAQ:NMRK) is the most popular stock in this table. On the other hand NBT Bancorp Inc. (NASDAQ:NBTB) is the least popular one with only 6 bullish hedge fund positions. Revolve Group, Inc. (NYSE:RVLV) 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately RVLV wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); RVLV investors were disappointed as the stock returned -31% during the first two months of the fourth quarter 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 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
