“Since 2006, value stocks (IVE vs IVW) have underperformed 11 of the 13 calendar years and when they beat growth, it wasn’t by much. Cumulatively, through this week, it has been a 122% differential (up 52% for value vs up 174% for growth). This appears to be the longest and most severe drought for value investors since data collection began. It will go our way eventually as there are too many people paying far too much for today’s darlings, both public and private. Further, the ten-year yield of 2.5% (pre-tax) isn’t attractive nor is real estate. We believe the value part of the global equity market is the only place to earn solid risk adjusted returns and we believe those returns will be higher than normal,” said Vilas Fund in its Q1 investor letter. We aren’t sure whether value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. That’s why we believe it would be worthwhile to take a look at the hedge fund sentiment on Ritchie Bros. Auctioneers Incorporated (NYSE:RBA) in order to identify whether reputable and successful top money managers continue to believe in its potential.
Ritchie Bros. Auctioneers Incorporated (NYSE:RBA) was in 15 hedge funds’ portfolios at the end of March. RBA investors should pay attention to an increase in enthusiasm from smart money lately. There were 12 hedge funds in our database with RBA holdings at the end of the previous quarter. Our calculations also showed that RBA isn’t among the 30 most popular stocks among hedge funds.
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 take a gander at the key hedge fund action surrounding Ritchie Bros. Auctioneers Incorporated (NYSE:RBA).
What does smart money think about Ritchie Bros. Auctioneers Incorporated (NYSE:RBA)?
At Q1’s end, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 25% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards RBA over the last 15 quarters. So, let’s examine 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, Royce & Associates, managed by Chuck Royce, holds the number one position in Ritchie Bros. Auctioneers Incorporated (NYSE:RBA). Royce & Associates has a $54.7 million position in the stock, comprising 0.5% of its 13F portfolio. Sitting at the No. 2 spot is Balyasny Asset Management, managed by Dmitry Balyasny, which holds a $23.7 million position; 0.2% of its 13F portfolio is allocated to the company. Some other hedge funds and institutional investors that are bullish comprise Jim Simons’s Renaissance Technologies, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and D. E. Shaw’s D E Shaw.
As industrywide interest jumped, some big names were breaking ground themselves. Balyasny Asset Management, managed by Dmitry Balyasny, established the most outsized position in Ritchie Bros. Auctioneers Incorporated (NYSE:RBA). Balyasny Asset Management had $23.7 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also initiated a $16.6 million position during the quarter. The other funds with new positions in the stock are Matthew Tewksbury’s Stevens Capital Management, Ken Griffin’s Citadel Investment Group, and Steve Cohen’s Point72 Asset Management.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Ritchie Bros. Auctioneers Incorporated (NYSE:RBA) but similarly valued. We will take a look at Two Harbors Investment Corp (NYSE:TWO), Immunomedics, Inc. (NASDAQ:IMMU), Tandem Diabetes Care Inc (NASDAQ:TNDM), and MasTec, Inc. (NYSE:MTZ). All of these stocks’ market caps are closest to RBA’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TWO | 18 | 101532 | 2 |
| IMMU | 24 | 801981 | -4 |
| TNDM | 33 | 492339 | 8 |
| MTZ | 28 | 874933 | -1 |
| Average | 25.75 | 567696 | 1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 25.75 hedge funds with bullish positions and the average amount invested in these stocks was $568 million. That figure was $151 million in RBA’s case. Tandem Diabetes Care Inc (NASDAQ:TNDM) is the most popular stock in this table. On the other hand Two Harbors Investment Corp (NYSE:TWO) is the least popular one with only 18 bullish hedge fund positions. Compared to these stocks Ritchie Bros. Auctioneers Incorporated (NYSE:RBA) is even less popular than TWO. Hedge funds clearly dropped the ball on RBA as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. A small number of hedge funds were also right about betting on RBA as the stock returned 7.2% during the same period and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
