Is Raven Industries, Inc. (RAVN) A Good Stock To Buy?

At Insider Monkey, we pore over the filings of more than 700 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of September 30. In this article, we will use that wealth of knowledge to determine whether or not Raven Industries, Inc. (NASDAQ:RAVN) makes for a good investment right now.

Raven Industries, Inc. (NASDAQ:RAVN) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 9 hedge funds’ portfolios at the end of the third quarter of 2015. However, stock market sentiment might be of worry to the investors, considering a decline of 16.63% in the share prices of Raven Industries, Inc. (NASDAQ:RAVN) during the third quarter. This behavior prompted us to find out more about hedge fund interest and the hedgies that maintained stakes in the company, at the end of the last quarter.

The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity, but it may still be less popular than similarly priced stocks. That’s why at the end of this article, we will examine companies such as Chegg Inc (NYSE:CHGG), Diamond Hill Investment Group, Inc. (NASDAQ:DHIL), and Sportsman’s Warehouse Holdings Inc (NASDAQ:SPWH) to gather more data points.

To most traders, hedge funds are seen as worthless, old investment tools of the past. While there are more than 8000 funds trading at the moment, we choose to focus on the leaders of this group, around 700 funds. It is estimated that this group of investors manages most of all hedge funds’ total capital, and by following their unrivaled picks, Insider Monkey has identified numerous investment strategies that have historically outperformed the market. Insider Monkey’s small-cap hedge fund strategy outpaced the S&P 500 index by 12 percentage points per year for a decade in their back tests.

Now, let’s view the key action surrounding Raven Industries, Inc. (NASDAQ:RAVN).

What does the smart money think about Raven Industries, Inc. (NASDAQ:RAVN)?

Heading into Q4, a total of 9 of the hedge funds tracked by Insider Monkey were bullish on this stock, unchanged from one quarter earlier. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were upping their holdings considerably (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Royce & Associates, managed by Chuck Royce, holds the number one position in Raven Industries, Inc. (NASDAQ:RAVN). Royce & Associates has a $28.8 million position in the stock, comprising 0.2% of its 13F portfolio. Sitting at the No. 2 spot is Citadel Investment Group, managed by Ken Griffin, which holds a $4.2 million position; the fund has less than 0.1% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors that hold long positions contain Jeffrey Bronchick’s Cove Street Capital, Renaissance Technologies, and Mario Gabelli’s GAMCO Investors.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: 999. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically, a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case here because only one of the 700+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was PEAK6 Capital Management).

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Raven Industries, Inc. (NASDAQ:RAVN) but similarly valued. We will take a look at Chegg Inc (NYSE:CHGG), Diamond Hill Investment Group, Inc. (NASDAQ:DHIL), Sportsman’s Warehouse Holdings Inc (NASDAQ:SPWH), and Dime Community Bancshares, Inc. (NASDAQ:DCOM). This group of stocks’ market caps match Raven Industries, Inc. (NASDAQ:RAVN)’s market cap.

As you can see, these stocks had an average of 12 hedge funds with bullish positions and the average amount invested in these stocks was $55 million. That figure was $46 million in Raven Industries, Inc. (NASDAQ:RAVN)’s case. Sportsman’s Warehouse Holdings Inc (NASDAQ:SPWH) is the most popular stock in this table. On the other hand, Diamond Hill Investment Group, Inc. (NASDAQ:DHIL) is the least popular one with only 5 bullish hedge fund positions. Raven Industries, Inc. (NASDAQ:RAVN) 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. In this regard, Sportsman’s Warehouse Holdings Inc (NASDAQ:SPWH) might be a better candidate to consider a long position.