Raven Industries, Inc. (NASDAQ:RAVN)‘s stock has dropped by more than 20% since the beginning of the year, but gained more than 11% on Monday after the diversified technology company was awarded an aerostat contract worth around $6 million. As the news about this contract broke, Raven Industries, Inc. (NASDAQ:RAVN) ‘s stock rallied, gaining $2.14 per share for the day. According to its firm-fixed price contract with the Naval Air Warfare Center Aircraft Division Lakehurst in New Jersey, the company will supply Exportable Persistent Ground Surveillance Systems and equipment, and give needed technical support for the system. Raven Industries, Inc. (NASDAQ:RAVN) stock has one ‘Strong Buy’ rating and one ‘Hold’ rating from analysts. Let’s look at some additional valuable indicators, including hedge fund sentiment, to see if this is a stock worth adding to your portfolio now.
An everyday investor does not have the time or the required skill-set to carry out an in-depth analysis of equities and identify companies with the best future prospects like a fund with the knowledge and resources of a Berkshire Hathaway or ValueAct Capital can. However, it is also not a good idea to pay the egregiously high fees that investment firms charge for their stock-picking expertise. Thus a retail investor is better off to monkey the most popular stock picks among hedge funds by him or herself. But not just any picks mind you. Our research has shown that a portfolio based on hedge funds’ top stock picks (which are invariably comprised entirely of large-cap companies) falls considerably short of a portfolio based on their best small-cap stock picks. The most popular large-cap stocks among hedge funds under performed the market by an average of seven basis points per month in our back tests whereas the 15 most popular small-cap stock picks among hedge funds outperformed the market by nearly a percentage point per month over the same period between 1999 and 2012. Since officially launching our small-cap strategy in August 2012 it has performed just as predicted, beating the market by over 84 percentage points and returning over 144%, while hedge funds themselves have collectively under performed the market (read the details here).
The number of hedge fund positions in a company and the quarterly changes to those positions give us a clear indication of how hedge funds, which are run and powered by some of the most astute minds in finance, feel about a stock. For Raven Industries, Inc. (NASDAQ:RAVN), the number of hedge fund positions in the stock went up to 9 by the end of first quarter, from 8 at the end of 2014. Overall aggregate capital invested in the stock by hedge funds also increased by 3.6% to $46.25 million by the end of first quarter. This shows solid hedge fund sentiment on the stock.
Insider activity on the stock gives another valuable perspective as well. There were no insider sales of the stock filed in the first quarter. But there were a few insider purchases in the second quarter. Director at Raven Industries, Inc. (NASDAQ:RAVN), Marc Lebaron purchased 5,000 shares in April. Another Director, Jason Andringa purchased 2,488 shares in May, and VP and GM Brian Meyer purchased 1,000 shares earlier this month. Insider purchases are a strong indicator, and Raven had multiple.
Let’s take a look at the key hedge fund action encompassing Raven Industries, Inc. (NASDAQ:RAVN) now.
Hedge fund activity in Raven Industries, Inc. (NASDAQ:RAVN)
At the end of the first quarter, a total of 9 hedge funds held long positions in this stock, a change of 13% from the fourth quarter. Overall, aggregate invested capital by these hedge funds also increased by 3.6% from the fourth quarter. With hedgies’ showing a bullish outlook on the stock, some hedge fund managers opened new positions in the stock and a few others strengthened their positions in the stock.
According to Insider Monkey’s database, Royce & Associates, managed by Chuck Royce, holds the largest position in Raven Industries, Inc. (NASDAQ:RAVN). Royce & Associates holds 1.6 million shares valued at $32.7 million, comprising 0.12% of its 13F portfolio at the end of the first quarter. Coming in second is Jim Simons‘ Renaissance Technologies, with around 197,116 shares valued at $4 million at the end of the first quarter. The fund has less than 0.1% of its 13F portfolio invested in the stock. Other members of the smart money with similar optimism consist of Ken Griffin‘s Citadel Investment Group, and John Overdeck and David Siegel’s Two Sigma Advisors.
Consequently, some hedge fund names were leading the bulls’ herd by opening up fresh positions in the stock. Cove Street Capital, managed by Jeffrey Bronchick, initiated the largest position in Raven Industries, Inc. (NASDAQ:RAVN) in the first quarter. Cove Street Capital bought 63,300 shares valued at $1.3 million at the end of the first quarter. Donald Yacktman’s Yacktman Asset Management also initiated a $542,000 position during the quarter, buying 26,500 shares of the company. The only other fund with a brand new RAVN position is Paul Marshall and Ian Wace’s Marshall Wace LLP.
We see that insider sentiment is strongly positive for the stock, along with strong hedge fund sentiment and an 11% upside movement following positive news for the company. With all of these positive indicators, we recommend buying this stock.
Disclosure: None
