A market correction in the fourth quarter, spurred by a number of global macroeconomic concerns and rising interest rates ended up having a negative impact on the markets and many hedge funds as a result. The stocks of smaller companies were especially hard hit during this time as investors fled to investments seen as being safer. This is evident in the fact that the Russell 2000 ETF underperformed the S&P 500 ETF by nearly 7 percentage points during the fourth quarter. We also received indications that hedge funds were trimming their positions amid the market volatility and uncertainty, and given their greater inclination towards smaller cap stocks than other investors, it follows that a stronger sell-off occurred in those stocks. Let’s study the hedge fund sentiment to see how those concerns affected their ownership of Range Resources Corp. (NYSE:RRC) during the quarter.
Is Range Resources Corp. (NYSE:RRC) a safe investment right now? Money managers are becoming more confident. The number of bullish hedge fund bets increased by 2 recently. Our calculations also showed that RRC isn’t among the 30 most popular stocks among hedge funds.
Why do we pay any attention at all to hedge fund sentiment? 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 market by 32 percentage points since May 2014 through March 12, 2019 (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 27.5% through March 12, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let’s analyze the recent hedge fund action surrounding Range Resources Corp. (NYSE:RRC).
What does the smart money think about Range Resources Corp. (NYSE:RRC)?
At the end of the fourth quarter, a total of 31 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 7% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards RRC over the last 14 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).
Among these funds, SailingStone Capital Partners held the most valuable stake in Range Resources Corp. (NYSE:RRC), which was worth $384.1 million at the end of the third quarter. On the second spot was Millennium Management which amassed $69.3 million worth of shares. Moreover, Kopernik Global Investors, Carlson Capital, and D E Shaw were also bullish on Range Resources Corp. (NYSE:RRC), allocating a large percentage of their portfolios to this stock.
Consequently, some big names were breaking ground themselves. Luxor Capital Group, managed by Christian Leone, created the largest call position in Range Resources Corp. (NYSE:RRC). Luxor Capital Group had $9.6 million invested in the company at the end of the quarter. David Costen Haley’s HBK Investments also initiated a $4.4 million position during the quarter. The other funds with brand new RRC positions are Paul Marshall and Ian Wace’s Marshall Wace LLP, Minhua Zhang’s Weld Capital Management, and Glenn Greenberg’s Brave Warrior Capital.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Range Resources Corp. (NYSE:RRC) but similarly valued. We will take a look at Premier Inc (NASDAQ:PINC), South Jersey Industries Inc (NYSE:SJI), Brookfield Property REIT Inc. (NASDAQ:BPR), and FirstService Corporation (TSE:FSV). This group of stocks’ market caps match RRC’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PINC | 18 | 181570 | -3 |
| SJI | 12 | 70335 | -2 |
| BPR | 14 | 143546 | -6 |
| FSV | 13 | 123401 | 0 |
| Average | 14.25 | 129713 | -2.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.25 hedge funds with bullish positions and the average amount invested in these stocks was $130 million. That figure was $724 million in RRC’s case. Premier Inc (NASDAQ:PINC) is the most popular stock in this table. On the other hand South Jersey Industries Inc (NYSE:SJI) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Range Resources Corp. (NYSE:RRC) is more popular among hedge funds. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately RRC wasn’t nearly as popular as these 15 stock and hedge funds that were betting on RRC were disappointed as the stock returned 2.9% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.
