Is Revolve Group, Inc. (RVLV) A Good Stock To Buy?

In this article you are going to find out whether hedge funds think Revolve Group, Inc. (NYSE:RVLV) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Is RVLV a good stock to buy? Revolve Group, Inc. (NYSE:RVLV) has experienced a decrease in hedge fund sentiment recently. Revolve Group, Inc. (NYSE:RVLV) was in 22 hedge funds’ portfolios at the end of June. The all time high for this statistic is 29. Our calculations also showed that RVLV isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.

Peter Rathjens of Arrowstreet Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Now let’s go over the latest hedge fund action regarding Revolve Group, Inc. (NYSE:RVLV).

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

At the end of June, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of -24% from the first quarter of 2020. On the other hand, there were a total of 11 hedge funds with a bullish position in RVLV a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Revolve Group, Inc. (NYSE:RVLV) was held by Two Sigma Advisors, which reported holding $43.4 million worth of stock at the end of June. It was followed by Renaissance Technologies with a $40.6 million position. Other investors bullish on the company included Arrowstreet Capital, D E Shaw, and Driehaus Capital. In terms of the portfolio weights assigned to each position Kamunting Street Capital allocated the biggest weight to Revolve Group, Inc. (NYSE:RVLV), around 1.39% of its 13F portfolio. Wallace Capital Management is also relatively very bullish on the stock, dishing out 0.55 percent of its 13F equity portfolio to RVLV.

Due to the fact that Revolve Group, Inc. (NYSE:RVLV) has witnessed declining sentiment from the smart money, logic holds that there is a sect of fund managers that decided to sell off their positions entirely by the end of the second quarter. It’s worth mentioning that Gavin Baker’s Atreides Management cut the largest position of the “upper crust” of funds monitored by Insider Monkey, valued at about $24.1 million in stock, and Andrew Sandler’s Sandler Capital Management was right behind this move, as the fund said goodbye to about $21.4 million worth. These transactions are important to note, as aggregate hedge fund interest dropped by 7 funds by the end of the second quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Revolve Group, Inc. (NYSE:RVLV). We will take a look at Spirit AeroSystems Holdings, Inc. (NYSE:SPR), Red Rock Resorts, Inc. (NASDAQ:RRR), Atotech Limited (NYSE:ATC), VIZIO Holding Corp. (NYSE:VZIO), Antero Midstream Corp (NYSE:AM), Neogen Corporation (NASDAQ:NEOG), and New Residential Investment Corp (NYSE:NRZ). This group of stocks’ market valuations are closest to RVLV’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.6 hedge funds with bullish positions and the average amount invested in these stocks was $285 million. That figure was $211 million in RVLV’s case. Spirit AeroSystems Holdings, Inc. (NYSE:SPR) is the most popular stock in this table. On the other hand Neogen Corporation (NASDAQ:NEOG) is the least popular one with only 12 bullish hedge fund positions. Revolve Group, Inc. (NYSE:RVLV) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for RVLV is 42.5. 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. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through October 22nd and beat the market again by 1.6 percentage points. Unfortunately RVLV wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on RVLV were disappointed as the stock returned 1.9% since the end of June (through 10/22) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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

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