Hedge fund managers like David Einhorn, Bill Ackman, or Carl Icahn became billionaires through reaping large profits for their investors, which is why piggybacking their stock picks may provide us with significant returns as well. Many hedge funds, like Paul Singer’s Elliott Management, are pretty secretive, but we can still get some insights by analyzing their quarterly 13F filings. One of the most fertile grounds for large abnormal returns is hedge funds’ most popular small-cap picks, which are not so widely followed and often trade at a discount to their intrinsic value. In this article we will check out hedge fund activity in another small-cap stock: Rayonier Inc. (NYSE:RYN).
Is Rayonier Inc. (NYSE:RYN) the right investment to pursue these days? Hedge funds are buying. The number of long hedge fund bets moved up by 2 in recent months. Our calculations also showed that RYN isn’t among the 30 most popular stocks among hedge funds.
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 20.7% year to date (through March 12th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 32 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 look at the new hedge fund action regarding Rayonier Inc. (NYSE:RYN).
What have hedge funds been doing with Rayonier Inc. (NYSE:RYN)?
At Q4’s end, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 12% from the second quarter of 2018. Below, you can check out the change in hedge fund sentiment towards RYN over the last 14 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).
More specifically, Renaissance Technologies was the largest shareholder of Rayonier Inc. (NYSE:RYN), with a stake worth $111.9 million reported as of the end of September. Trailing Renaissance Technologies was Third Avenue Management, which amassed a stake valued at $63.2 million. Impax Asset Management, Arrowstreet Capital, and Millennium Management were also very fond of the stock, giving the stock large weights in their portfolios.
Now, key hedge funds were leading the bulls’ herd. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, assembled the biggest position in Rayonier Inc. (NYSE:RYN). Marshall Wace LLP had $6.7 million invested in the company at the end of the quarter. Bruce Kovner’s Caxton Associates LP also initiated a $0.8 million position during the quarter. The other funds with brand new RYN positions are Minhua Zhang’s Weld Capital Management, David Harding’s Winton Capital Management, and Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Rayonier Inc. (NYSE:RYN) but similarly valued. These stocks are PS Business Parks Inc (NYSE:PSB), CACI International Inc (NYSE:CACI), Urban Outfitters, Inc. (NASDAQ:URBN), and IBERIABANK Corporation (NASDAQ:IBKC). All of these stocks’ market caps resemble RYN’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PSB | 12 | 72120 | 6 |
| CACI | 18 | 122971 | -2 |
| URBN | 28 | 370543 | -3 |
| IBKC | 24 | 224156 | 3 |
| Average | 20.5 | 197448 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.5 hedge funds with bullish positions and the average amount invested in these stocks was $197 million. That figure was $293 million in RYN’s case. Urban Outfitters, Inc. (NASDAQ:URBN) is the most popular stock in this table. On the other hand PS Business Parks Inc (NYSE:PSB) is the least popular one with only 12 bullish hedge fund positions. Rayonier Inc. (NYSE:RYN) 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 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately RYN wasn’t nearly as popular as these 15 stock (hedge fund sentiment was quite bearish); RYN investors were disappointed as the stock returned 14.2% 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.
