Out of thousands of stocks that are currently traded on the market, it is difficult to determine those that can really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of over 700 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Rexnord Corp (NYSE:RXN).
Rexnord Corp (NYSE:RXN) has seen an increase in hedge fund interest lately. RXN was in 17 hedge funds’ portfolios at the end of September. There were 16 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 Ligand Pharmaceuticals Inc. (NASDAQ:LGND), Select Income REIT (NYSE:SIR), and Washington Real Estate Investment Trust (NYSE:WRE) to get a better sense of its popularity.
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To most shareholders, hedge funds are assumed to be slow, old investment vehicles of the past. While there are greater than 8000 funds in operation today, We choose to focus on the aristocrats of this group, about 700 funds. These hedge fund managers command the lion’s share of the hedge fund industry’s total capital, and by keeping an eye on their highest performing picks, Insider Monkey has uncovered a number of investment strategies that have historically outpaced the S&P 500 index. Insider Monkey’s small-cap hedge fund strategy outrun the S&P 500 index by 12 percentage points a year for a decade in their back tests.
With all of this in mind, we’re going to review the latest action surrounding Rexnord Corp (NYSE:RXN).
How are hedge funds trading Rexnord Corp (NYSE:RXN)?
At Q3’s end, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 6% from the previous quarter. With hedgies’ capital changing hands, there exists a few key hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Phill Gross and Robert Atchinson’s Adage Capital Management has the most valuable position in Rexnord Corp (NYSE:RXN), worth close to $99.4 million, accounting for 0.3% of its total 13F portfolio. The second most bullish fund manager is D E Shaw, managed by D. E. Shaw, which holds a $23.7 million position; the fund has less than 0.1% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors that hold long positions consist of Ian Simm’s Impax Asset Management, Jim Simons’s Renaissance Technologies and Israel Englander’s Millennium Management.
With a general bullishness amongst the heavyweights, key hedge funds were breaking ground themselves. Nine Chapters Capital Management, managed by Chao Ku, established the most outsized position in Rexnord Corp (NYSE:RXN). The fund reportedly had $1.3 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also initiated a $1 million position during the quarter. The other funds with brand new RXN positions are Peter Muller’s PDT Partners, Paul Marshall and Ian Wace’s Marshall Wace LLP, and Benjamin A. Smith’s Laurion Capital Management.
Let’s go over hedge fund activity in other stocks similar to Rexnord Corp (NYSE:RXN). These stocks are Ligand Pharmaceuticals Inc. (NASDAQ:LGND), Select Income REIT (NYSE:SIR), Washington Real Estate Investment Trust (NYSE:WRE), and Holly Energy Partners, L.P. (NYSE:HEP). This group of stocks’ market valuations match RXN’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| LGND | 16 | 210066 | -3 |
| SIR | 14 | 86926 | -2 |
| WRE | 5 | 5602 | 1 |
| HEP | 5 | 4209 | 1 |
As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $77 million. That figure was $166 million in RXN’s case. Ligand Pharmaceuticals Inc. (NASDAQ:LGND) is the most popular stock in this table, while Washington Real Estate Investment Trust (NYSE:WRE) and Holly Energy Partners, L.P. (NYSE:HEP) are the laggards with only 5 bullish hedge fund positions. Compared to these stocks Rexnord Corp (NYSE:RXN) is more popular among hedge funds and the amount invested is significantly north of the average. 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.
