Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Renewable Energy Group Inc (NASDAQ:REGI)? The smart money sentiment can provide an answer to this question.
Renewable Energy Group Inc (NASDAQ:REGI) was in 17 hedge funds’ portfolios at the end of the second quarter of 2019. REGI has seen a decrease in activity from the world’s largest hedge funds of late. There were 19 hedge funds in our database with REGI holdings at the end of the previous quarter. Our calculations also showed that REGI isn’t among the 30 most popular stocks among hedge funds (see the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Today there are a large number of methods shareholders have at their disposal to analyze publicly traded companies. A couple of the less utilized methods are hedge fund and insider trading indicators. Our experts have shown that, historically, those who follow the top picks of the best hedge fund managers can outperform the S&P 500 by a very impressive margin (see the details here).
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s take a peek at the fresh hedge fund action regarding Renewable Energy Group Inc (NASDAQ:REGI).
How are hedge funds trading Renewable Energy Group Inc (NASDAQ:REGI)?
Heading into the third quarter of 2019, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, a change of -11% from one quarter earlier. By comparison, 13 hedge funds held shares or bullish call options in REGI a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Till Bechtolsheimer’s Arosa Capital Management has the most valuable position in Renewable Energy Group Inc (NASDAQ:REGI), worth close to $16.7 million, accounting for 2.6% of its total 13F portfolio. The second largest stake is held by GLG Partners, led by Noam Gottesman, holding a $7 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining members of the smart money that hold long positions encompass Dmitry Balyasny’s Balyasny Asset Management, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and Clint Carlson’s Carlson Capital.
Because Renewable Energy Group Inc (NASDAQ:REGI) has witnessed falling interest from hedge fund managers, we can see that there was a specific group of hedgies that decided to sell off their entire stakes in the second quarter. It’s worth mentioning that Ken Griffin’s Citadel Investment Group dropped the biggest position of all the hedgies followed by Insider Monkey, worth an estimated $53.3 million in stock, and Paul Marshall and Ian Wace’s Marshall Wace LLP was right behind this move, as the fund dumped about $2.9 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest was cut by 2 funds in the second quarter.
Let’s now take a look at hedge fund activity in other stocks similar to Renewable Energy Group Inc (NASDAQ:REGI). These stocks are Nicolet Bankshares Inc. (NASDAQ:NCBS), ORBCOMM Inc (NASDAQ:ORBC), Hoegh LNG Partners LP (NYSE:HMLP), and Aurinia Pharmaceuticals Inc (NASDAQ:AUPH). This group of stocks’ market valuations match REGI’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NCBS | 4 | 5945 | 1 |
| ORBC | 13 | 87233 | -3 |
| HMLP | 6 | 19349 | 1 |
| AUPH | 11 | 93893 | -2 |
| Average | 8.5 | 51605 | -0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.5 hedge funds with bullish positions and the average amount invested in these stocks was $52 million. That figure was $55 million in REGI’s case. ORBCOMM Inc (NASDAQ:ORBC) is the most popular stock in this table. On the other hand Nicolet Bankshares Inc. (NASDAQ:NCBS) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Renewable Energy Group Inc (NASDAQ:REGI) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately REGI wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on REGI were disappointed as the stock returned -5.4% during the third quarter 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 in Q3.
Disclosure: None. This article was originally published at Insider Monkey.
