While the market driven by short-term sentiment influenced by uncertainty regarding the future of the interest rate environment in the US, declining oil prices and the trade war with China, many smart money investors kept their optimism regarding the current bull run in the fourth quarter, while still hedging many of their long positions. However, as we know, big investors usually buy stocks with strong fundamentals, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Renewable Energy Group Inc (NASDAQ:REGI).
Is Renewable Energy Group Inc (NASDAQ:REGI) a splendid investment right now? Hedge funds are getting less optimistic. The number of long hedge fund positions retreated by 3 recently. Our calculations also showed that REGI 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 review the latest hedge fund action surrounding Renewable Energy Group Inc (NASDAQ:REGI).
Hedge fund activity in Renewable Energy Group Inc (NASDAQ:REGI)
At the end of the fourth quarter, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of -14% from the previous quarter. The graph below displays the number of hedge funds with bullish position in REGI over the last 14 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, GLG Partners held the most valuable stake in Renewable Energy Group Inc (NASDAQ:REGI), which was worth $14.5 million at the end of the fourth quarter. On the second spot was Arosa Capital Management which amassed $14.1 million worth of shares. Moreover, Renaissance Technologies, Balyasny Asset Management, and Gotham Asset Management were also bullish on Renewable Energy Group Inc (NASDAQ:REGI), allocating a large percentage of their portfolios to this stock.
Due to the fact that Renewable Energy Group Inc (NASDAQ:REGI) has experienced a decline in interest from the entirety of the hedge funds we track, it’s safe to say that there exists a select few funds who sold off their positions entirely in the third quarter. At the top of the heap, Andy Redleaf’s Whitebox Advisors cut the largest investment of the 700 funds tracked by Insider Monkey, comprising an estimated $30.6 million in stock. Ian Cumming and Joseph Steinberg’s fund, Leucadia National, also sold off its stock, about $4.1 million worth. These transactions are interesting, as total hedge fund interest fell by 3 funds in the third quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Renewable Energy Group Inc (NASDAQ:REGI) but similarly valued. We will take a look at RPT Realty (NYSE:RPT), The Chefs Warehouse, Inc (NASDAQ:CHEF), Endurance International Group Holdings Inc (NASDAQ:EIGI), and New Mountain Finance Corp. (NYSE:NMFC). This group of stocks’ market caps resemble REGI’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| RPT | 11 | 12153 | 2 |
| CHEF | 10 | 49962 | 0 |
| EIGI | 18 | 113243 | 3 |
| NMFC | 11 | 15280 | -1 |
| Average | 12.5 | 47660 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.5 hedge funds with bullish positions and the average amount invested in these stocks was $48 million. That figure was $84 million in REGI’s case. Endurance International Group Holdings Inc (NASDAQ:EIGI) is the most popular stock in this table. On the other hand The Chefs Warehouse, Inc (NASDAQ:CHEF) is the least popular one with only 10 bullish hedge fund positions. Renewable Energy Group Inc (NASDAQ:REGI) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 REGI wasn’t nearly as popular as these 15 stock and hedge funds that were betting on REGI were disappointed as the stock returned -7.9% 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.
