The successful funds run by legendary investors such as Dan Loeb and David Tepper make hundreds of millions of dollars for themselves and their investors by spending enormous resources doing research on small cap stocks that big investment banks don’t follow. Because of their pay structures, they have strong incentive to do the research necessary to beat the market. That’s why we pay close attention to what they think in small cap stocks. In this article, we take a closer look at Rexnord Corp (NYSE:RXN) from the perspective of those successful funds.
Rexnord Corp (NYSE:RXN) has seen a decrease in support from the world’s most successful money managers lately. RXN was in 16 hedge funds’ portfolios at the end of September. There were 19 hedge funds in our database with RXN holdings at the end of the previous quarter. At the end of this article we will also compare RXN to other stocks including Watts Water Technologies Inc (NYSE:WTS), Pretium Resources Inc (NYSE:PVG), and Dorman Products Inc. (NASDAQ:DORM) to get a better sense of its popularity.
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At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
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What does the smart money think about Rexnord Corp (NYSE:RXN)?
Heading into the fourth quarter of 2016, a total of 16 of the hedge funds tracked by Insider Monkey were long this stock, a drop of 16% from one quarter earlier. On the other hand, there were a total of 13 hedge funds with a bullish position in RXN at the beginning of this year, so hedge fund ownership is still up this year. With hedge funds’ sentiment swirling, there exists a select group of notable hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Phill Gross and Robert Atchinson’s Adage Capital Management has the largest position in Rexnord Corp (NYSE:RXN), worth close to $63.6 million. Coming in second is Impax Asset Management, led by Ian Simm, holding a $46.5 million position; the fund has 2.1% of its 13F portfolio invested in the stock. Some other professional money managers with similar optimism contain David E. Shaw’s D E Shaw, Richard S. Meisenberg’s ACK Asset Management, and Jim Simons’ Renaissance Technologies. We should note that Impax Asset Management is among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
We already know that not all hedge funds are bullish on the stock and some hedge funds actually cut their positions entirely. It’s worth mentioning that Joel Greenblatt’s Gotham Asset Management cut the largest investment of all the hedgies followed by Insider Monkey, comprising about $2.4 million in stock. Gregg Moskowitz’s fund, Interval Partners, also said goodbye to its stock, about $2 million worth.
Let’s now review hedge fund activity in other stocks similar to Rexnord Corp (NYSE:RXN). These stocks are Watts Water Technologies Inc (NYSE:WTS), Pretium Resources Inc (NYSE:PVG), Dorman Products Inc. (NASDAQ:DORM), and The Corporate Executive Board Company (NYSE:CEB). This group of stocks’ market valuations resemble RXN’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| WTS | 11 | 433841 | -2 |
| PVG | 12 | 140797 | 2 |
| DORM | 9 | 94022 | 0 |
| CEB | 12 | 66299 | 1 |
As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $184 million. That figure was $192 million in RXN’s case. Pretium Resources Inc (NYSE:PVG) is the most popular stock in this table. On the other hand Dorman Products Inc. (NASDAQ:DORM) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Rexnord Corp (NYSE:RXN) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
Disclosure: None
