Is RPM International Inc. (NYSE:RPM) a good stock to buy right now? We at Insider Monkey like to examine what billionaires and hedge funds think of a company before doing days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also have numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
RPM International Inc. (NYSE:RPM) has seen a decrease in support from the world’s most elite money managers in recent months. RPM was in 23 hedge funds’ portfolios at the end of December. There were 28 hedge funds in our database with RPM positions at the end of the previous quarter. Our calculations also showed that RPM isn’t among the 30 most popular stocks among hedge funds.
If you’d ask most stock holders, hedge funds are viewed as unimportant, outdated investment vehicles of the past. While there are over 8000 funds with their doors open at the moment, Our experts choose to focus on the elite of this group, around 750 funds. These money managers have their hands on bulk of all hedge funds’ total capital, and by watching their best picks, Insider Monkey has revealed numerous investment strategies that have historically outrun the S&P 500 index. Insider Monkey’s flagship hedge fund strategy outrun the S&P 500 index by nearly 5 percentage points annually since its inception in May 2014 through early November 2018. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 27.5% since February 2017 (through March 12th) even though the market was up nearly 25% during the same period. We just shared a list of 6 short targets in our latest quarterly update and they are already down an average of 6% in less than a month.
We’re going to take a look at the recent hedge fund action encompassing RPM International Inc. (NYSE:RPM).
How are hedge funds trading RPM International Inc. (NYSE:RPM)?
Heading into the first quarter of 2019, a total of 23 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -18% from the previous quarter. By comparison, 15 hedge funds held shares or bullish call options in RPM a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in RPM International Inc. (NYSE:RPM) was held by Hound Partners, which reported holding $189.7 million worth of stock at the end of September. It was followed by Diamond Hill Capital with a $68.2 million position. Other investors bullish on the company included Starboard Value LP, Renaissance Technologies, and Point72 Asset Management.
Judging by the fact that RPM International Inc. (NYSE:RPM) has experienced bearish sentiment from the smart money, logic holds that there is a sect of money managers that decided to sell off their entire stakes last quarter. It’s worth mentioning that Ken Griffin’s Citadel Investment Group cut the biggest stake of the 700 funds monitored by Insider Monkey, totaling close to $15 million in stock, and Alex Duran and Scott Hendrickson’s Permian Investment Partners was right behind this move, as the fund sold off about $10.3 million worth. These transactions are important to note, as aggregate hedge fund interest was cut by 5 funds last quarter.
Let’s now review hedge fund activity in other stocks similar to RPM International Inc. (NYSE:RPM). We will take a look at Nordstrom, Inc. (NYSE:JWN), Qiagen NV (NYSE:QGEN), Avery Dennison Corporation (NYSE:AVY), and Brown & Brown, Inc. (NYSE:BRO). This group of stocks’ market valuations resemble RPM’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| JWN | 23 | 223501 | -3 |
| QGEN | 21 | 361499 | -3 |
| AVY | 28 | 474724 | -1 |
| BRO | 20 | 675949 | -2 |
| Average | 23 | 433918 | -2.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 23 hedge funds with bullish positions and the average amount invested in these stocks was $434 million. That figure was $461 million in RPM’s case. Avery Dennison Corporation (NYSE:AVY) is the most popular stock in this table. On the other hand Brown & Brown, Inc. (NYSE:BRO) is the least popular one with only 20 bullish hedge fund positions. RPM International Inc. (NYSE:RPM) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and 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 21.3% through April 8th and outperformed the S&P 500 ETF (SPY) by more than 5 percentage points. Unfortunately RPM wasn’t in this group. Hedge funds that bet on RPM were disappointed as the stock returned 3.3% and underperformed the market. If you are interested in investing in large cap stocks, you should check out the top 15 hedge fund stocks as 12 of these outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.
