Russell 2000 ETF (IWM) lagged the larger S&P 500 ETF (SPY) by more than 10 percentage points since the end of the third quarter of 2018 as investors first worried over the possible ramifications of rising interest rates and the escalation of the trade war with China. The hedge funds and institutional investors we track typically invest more in smaller-cap stocks than an average investor (i.e. only about 60% S&P 500 constituents were among the 500 most popular stocks among hedge funds), and we have seen data that shows those funds paring back their overall exposure. Those funds cutting positions in small-caps is one reason why volatility has increased. In the following paragraphs, we take a closer look at what hedge funds and prominent investors think of Regalwood Global Energy Ltd. (NYSE:RWGE) and see how the stock is affected by the recent hedge fund activity.
Regalwood Global Energy Ltd. (NYSE:RWGE) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 14 hedge funds’ portfolios at the end of the third quarter of 2019. At the end of this article we will also compare RWGE to other stocks including Capital Southwest Corporation (NASDAQ:CSWC), Oppenheimer Holdings Inc. (NYSE:OPY), and Greenlight Capital Re, Ltd. (NASDAQ:GLRE) to get a better sense of its popularity.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
To the average investor there are numerous gauges investors employ to evaluate publicly traded companies. A pair of the most useful gauges are hedge fund and insider trading sentiment. We have shown that, historically, those who follow the best picks of the top fund managers can beat the market by a superb amount (see the details here).
Jeffrey Tannenbaum of Fir Tree
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. We’re going to analyze the recent hedge fund action encompassing Regalwood Global Energy Ltd. (NYSE:RWGE).
What have hedge funds been doing with Regalwood Global Energy Ltd. (NYSE:RWGE)?
At Q3’s end, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the previous quarter. The graph below displays the number of hedge funds with bullish position in RWGE over the last 17 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Adage Capital Management was the largest shareholder of Regalwood Global Energy Ltd. (NYSE:RWGE), with a stake worth $20.6 million reported as of the end of September. Trailing Adage Capital Management was Angelo Gordon & Co, which amassed a stake valued at $16.5 million. Fir Tree, Governors Lane, and Marshall Wace 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 Angelo Gordon & Co allocated the biggest weight to Regalwood Global Energy Ltd. (NYSE:RWGE), around 2.11% of its 13F portfolio. Governors Lane is also relatively very bullish on the stock, dishing out 2.02 percent of its 13F equity portfolio to RWGE.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Weiss Asset Management. 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 in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Citadel Investment Group).
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Regalwood Global Energy Ltd. (NYSE:RWGE) but similarly valued. These stocks are Capital Southwest Corporation (NASDAQ:CSWC), Oppenheimer Holdings Inc. (NYSE:OPY), Greenlight Capital Re, Ltd. (NASDAQ:GLRE), and Unisys Corporation (NYSE:UIS). All of these stocks’ market caps are similar to RWGE’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CSWC | 9 | 40496 | -1 |
| OPY | 9 | 33323 | 0 |
| GLRE | 12 | 11627 | 4 |
| UIS | 24 | 43021 | 8 |
| Average | 13.5 | 32117 | 2.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.5 hedge funds with bullish positions and the average amount invested in these stocks was $32 million. That figure was $128 million in RWGE’s case. Unisys Corporation (NYSE:UIS) is the most popular stock in this table. On the other hand Capital Southwest Corporation (NASDAQ:CSWC) is the least popular one with only 9 bullish hedge fund positions. Regalwood Global Energy Ltd. (NYSE:RWGE) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately RWGE wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on RWGE were disappointed as the stock returned 0.3% during the fourth quarter (through the end of November) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.
