Here is What Hedge Funds Think About Ritchie Bros. Auctioneers Incorporated (RBA)

Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Ritchie Bros. Auctioneers Incorporated (NYSE:RBA)? The smart money sentiment can provide an answer to this question.

Is Ritchie Bros. Auctioneers Incorporated (NYSE:RBA) undervalued? Money managers were betting on the stock. The number of long hedge fund positions rose by 3 recently. Ritchie Bros. Auctioneers Incorporated (NYSE:RBA) was in 22 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 24. Our calculations also showed that RBA isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 19 hedge funds in our database with RBA holdings at the end of March.

In the 21st century investor’s toolkit there are a lot of gauges stock traders employ to evaluate stocks. Two of the less known gauges are hedge fund and insider trading indicators. Our experts have shown that, historically, those who follow the top picks of the elite investment managers can outpace the market by a superb amount (see the details here). Also, our monthly newsletter’s portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website.

Christian Leone of Luxor Capital Group

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind we’re going to review the latest hedge fund action regarding Ritchie Bros. Auctioneers Incorporated (NYSE:RBA).

Do Hedge Funds Think RBA Is A Good Stock To Buy Now?

At the end of the second quarter, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of 16% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards RBA over the last 24 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).

The largest stake in Ritchie Bros. Auctioneers Incorporated (NYSE:RBA) was held by Luxor Capital Group, which reported holding $122.6 million worth of stock at the end of June. It was followed by Pelham Capital with a $94.5 million position. Other investors bullish on the company included Renaissance Technologies, Alyeska Investment Group, and Royce & Associates. In terms of the portfolio weights assigned to each position Pelham Capital allocated the biggest weight to Ritchie Bros. Auctioneers Incorporated (NYSE:RBA), around 5.58% of its 13F portfolio. Luxor Capital Group is also relatively very bullish on the stock, dishing out 1.35 percent of its 13F equity portfolio to RBA.

Consequently, specific money managers were leading the bulls’ herd. Pelham Capital, managed by Ross Turner, created the most outsized position in Ritchie Bros. Auctioneers Incorporated (NYSE:RBA). Pelham Capital had $94.5 million invested in the company at the end of the quarter. Jordan Moelis and Jeff Farroni’s Deep Field Asset Management also made a $3.4 million investment in the stock during the quarter. The following funds were also among the new RBA investors: Paul Tudor Jones’s Tudor Investment Corp, Greg Eisner’s Engineers Gate Manager, and Donald Sussman’s Paloma Partners.

Let’s now take a look at hedge fund activity in other stocks similar to Ritchie Bros. Auctioneers Incorporated (NYSE:RBA). These stocks are Columbia Sportswear Company (NASDAQ:COLM), KT Corporation (NYSE:KT), Fox Factory Holding Corp (NASDAQ:FOXF), BJ’s Wholesale Club Holdings, Inc. (NYSE:BJ), Synovus Financial Corp. (NYSE:SNV), Hanesbrands Inc. (NYSE:HBI), and Planet Fitness Inc (NYSE:PLNT). All of these stocks’ market caps are closest to RBA’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 24.4 hedge funds with bullish positions and the average amount invested in these stocks was $429 million. That figure was $379 million in RBA’s case. Planet Fitness Inc (NYSE:PLNT) is the most popular stock in this table. On the other hand KT Corporation (NYSE:KT) is the least popular one with only 14 bullish hedge fund positions. Ritchie Bros. Auctioneers Incorporated (NYSE:RBA) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for RBA is 55.5. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through October 22nd and still beat the market by 1.6 percentage points. A small number of hedge funds were also right about betting on RBA as the stock returned 14.4% since the end of the second quarter (through 10/22) and outperformed the market by an even larger margin.

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Disclosure: None. This article was originally published at Insider Monkey.