Is RBA Stock A Buy or Sell?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We have processed the filings of the more than 887 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their December 31st holdings, data that is available nowhere else. Should you consider Ritchie Bros. Auctioneers Incorporated (NYSE:RBA) for your portfolio? We’ll look to this invaluable collective wisdom for the answer.

Is RBA stock a buy? Prominent investors were getting more optimistic. The number of bullish hedge fund positions increased by 2 lately. Ritchie Bros. Auctioneers Incorporated (NYSE:RBA) was in 23 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 24. Our calculations also showed that RBA isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

Donald Sussman of Paloma Partners

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, auto parts business is a recession resistant business, so we are taking a closer look at this discount auto parts stock that is growing at a 196% annualized rate. We go through lists like the 15 best micro-cap stocks to buy now to identify the next stock with 10x upside potential. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind let’s take a look at the latest hedge fund action regarding Ritchie Bros. Auctioneers Incorporated (NYSE:RBA).

Do Hedge Funds Think RBA Is A Good Stock To Buy Now?

Heading into the first quarter of 2021, a total of 23 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 10% from the third quarter of 2020. By comparison, 21 hedge funds held shares or bullish call options in RBA 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.

Among these funds, Luxor Capital Group held the most valuable stake in Ritchie Bros. Auctioneers Incorporated (NYSE:RBA), which was worth $238.8 million at the end of the fourth quarter. On the second spot was Renaissance Technologies which amassed $127.1 million worth of shares. Royce & Associates, Alyeska Investment Group, and Two Sigma Advisors were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Luxor Capital Group allocated the biggest weight to Ritchie Bros. Auctioneers Incorporated (NYSE:RBA), around 2.04% of its 13F portfolio. Alyeska Investment Group is also relatively very bullish on the stock, setting aside 0.42 percent of its 13F equity portfolio to RBA.

Now, key hedge funds have jumped into Ritchie Bros. Auctioneers Incorporated (NYSE:RBA) headfirst. Alyeska Investment Group, managed by Anand Parekh, initiated the biggest position in Ritchie Bros. Auctioneers Incorporated (NYSE:RBA). Alyeska Investment Group had $28 million invested in the company at the end of the quarter. Matthew Hulsizer’s PEAK6 Capital Management also initiated a $3 million position during the quarter. The other funds with brand new RBA positions are Donald Sussman’s Paloma Partners, Ray Dalio’s Bridgewater Associates, and Qing Li’s Sciencast Management.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Ritchie Bros. Auctioneers Incorporated (NYSE:RBA) but similarly valued. These stocks are Sotera Health Company (NASDAQ:SHC), Jones Lang LaSalle Inc (NYSE:JLL), American Financial Group, Inc. (NYSE:AFG), Ralph Lauren Corporation (NYSE:RL), Euronet Worldwide, Inc. (NASDAQ:EEFT), Quidel Corporation (NASDAQ:QDEL), and The Gap Inc. (NYSE:GPS). This group of stocks’ market values are similar to RBA’s market value.

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As you can see these stocks had an average of 29.7 hedge funds with bullish positions and the average amount invested in these stocks was $589 million. That figure was $522 million in RBA’s case. The Gap Inc. (NYSE:GPS) is the most popular stock in this table. On the other hand Jones Lang LaSalle Inc (NYSE:JLL) is the least popular one with only 23 bullish hedge fund positions. Compared to these stocks Ritchie Bros. Auctioneers Incorporated (NYSE:RBA) is even less popular than JLL. Our overall hedge fund sentiment score for RBA is 35.8. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Hedge funds dodged a bullet by taking a bearish stance towards RBA. Our calculations showed that the top 30 most popular hedge fund stocks returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.3% in 2021 through April 19th but managed to beat the market again by 0.9 percentage points. Unfortunately RBA wasn’t nearly as popular as these 30 stocks (hedge fund sentiment was very bearish); RBA investors were disappointed as the stock returned -9.6% since the end of the fourth quarter (through 4/19) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.

Disclosure: None. This article was originally published at Insider Monkey.