A market surge in the first quarter, spurred by easing global macroeconomic concerns and Powell’s pivot ended up having a positive impact on the markets and many hedge funds as a result. The stocks of smaller companies which were especially hard hit during the fourth quarter slightly outperformed the market during the first quarter. Unfortunately, Trump is unpredictable and volatility returned in the second quarter and smaller-cap stocks went back to selling off. We finished compiling the latest 13F filings to get an idea about what hedge funds are thinking about the overall market as well as individual stocks. In this article we will study the hedge fund sentiment to see how those concerns affected their ownership of Resources Connection, Inc. (NASDAQ:RECN) during the quarter.
Is Resources Connection, Inc. (NASDAQ:RECN) a cheap investment now? Investors who are in the know are betting on the stock. The number of long hedge fund positions improved by 1 lately. Our calculations also showed that RECN isn’t among the 30 most popular stocks among hedge funds. RECN was in 14 hedge funds’ portfolios at the end of the first quarter of 2019. There were 13 hedge funds in our database with RECN positions at the end of the previous quarter.
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 fresh hedge fund action regarding Resources Connection, Inc. (NASDAQ:RECN).
What have hedge funds been doing with Resources Connection, Inc. (NASDAQ:RECN)?
At Q1’s end, a total of 14 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 8% from the previous quarter. On the other hand, there were a total of 13 hedge funds with a bullish position in RECN a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).
The largest stake in Resources Connection, Inc. (NASDAQ:RECN) was held by Royce & Associates, which reported holding $16.1 million worth of stock at the end of March. It was followed by Arrowstreet Capital with a $8.1 million position. Other investors bullish on the company included Renaissance Technologies, Citadel Investment Group, and Marshall Wace LLP.
Now, specific money managers were breaking ground themselves. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, assembled the biggest position in Resources Connection, Inc. (NASDAQ:RECN). Marshall Wace LLP had $1.8 million invested in the company at the end of the quarter. D. E. Shaw’s D E Shaw also made a $0.4 million investment in the stock during the quarter. The only other fund with a new position in the stock is Peter Muller’s PDT Partners.
Let’s check out hedge fund activity in other stocks similar to Resources Connection, Inc. (NASDAQ:RECN). These stocks are Shoe Carnival, Inc. (NASDAQ:SCVL), Catalyst Pharmaceuticals, Inc. (NASDAQ:CPRX), Matrix Service Co (NASDAQ:MTRX), and Heritage Commerce Corp. (NASDAQ:HTBK). This group of stocks’ market valuations resemble RECN’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SCVL | 17 | 93706 | -2 |
| CPRX | 12 | 177932 | 2 |
| MTRX | 15 | 31874 | -4 |
| HTBK | 7 | 21498 | -2 |
| Average | 12.75 | 81253 | -1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.75 hedge funds with bullish positions and the average amount invested in these stocks was $81 million. That figure was $37 million in RECN’s case. Shoe Carnival, Inc. (NASDAQ:SCVL) is the most popular stock in this table. On the other hand Heritage Commerce Corp. (NASDAQ:HTBK) is the least popular one with only 7 bullish hedge fund positions. Resources Connection, Inc. (NASDAQ:RECN) 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 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. Unfortunately RECN wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on RECN were disappointed as the stock returned -1.2% during the same period 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 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.
