Is RF Stock A Buy or Sell?

We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Melvin Capital’s recent GameStop losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Regions Financial Corporation (NYSE:RF).

Is RF stock a buy? Investors who are in the know were in an optimistic mood. The number of long hedge fund bets improved by 3 lately. Regions Financial Corporation (NYSE:RF) was in 26 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 47. Our calculations also showed that RF isn’t among the 30 most popular stocks among hedge funds (click for Q4 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. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 124 percentage points since March 2017 (see the details here).

Richard S. Pzena of Pzena Investment Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the CBD market is growing at a 33% annualized rate, so we are taking a closer look at this under-the-radar hemp stock. We go through lists like the 10 best biotech stocks under $10 to identify the next stock with 10x upside potential. 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 website. With all of this in mind let’s review the fresh hedge fund action encompassing Regions Financial Corporation (NYSE:RF).

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

At the end of the fourth quarter, a total of 26 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 13% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards RF over the last 22 quarters. With hedgies’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).

Among these funds, Pzena Investment Management held the most valuable stake in Regions Financial Corporation (NYSE:RF), which was worth $68 million at the end of the fourth quarter. On the second spot was Two Sigma Advisors which amassed $37.2 million worth of shares. Millennium Management, Citadel Investment Group, and AQR Capital Management 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 Forest Hill Capital allocated the biggest weight to Regions Financial Corporation (NYSE:RF), around 3.01% of its 13F portfolio. Elizabeth Park Capital Management is also relatively very bullish on the stock, setting aside 0.59 percent of its 13F equity portfolio to RF.

Consequently, specific money managers have jumped into Regions Financial Corporation (NYSE:RF) headfirst. Point72 Asset Management, managed by Steve Cohen, initiated the largest position in Regions Financial Corporation (NYSE:RF). Point72 Asset Management had $5 million invested in the company at the end of the quarter. Ray Dalio’s Bridgewater Associates also initiated a $2.8 million position during the quarter. The other funds with brand new RF positions are Mika Toikka’s AlphaCrest Capital Management, Greg Eisner’s Engineers Gate Manager, and William Harnisch’s Peconic Partners LLC.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Regions Financial Corporation (NYSE:RF) but similarly valued. These stocks are Essex Property Trust Inc (NYSE:ESS), Caesars Entertainment Inc. (NASDAQ:CZR), CarMax Inc (NYSE:KMX), Shinhan Financial Group Co., Ltd. (NYSE:SHG), Waters Corporation (NYSE:WAT), Hewlett Packard Enterprise Company (NYSE:HPE), and Citizens Financial Group Inc (NYSE:CFG). This group of stocks’ market values are closest to RF’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 35.3 hedge funds with bullish positions and the average amount invested in these stocks was $947 million. That figure was $203 million in RF’s case. Caesars Entertainment Inc. (NASDAQ:CZR) is the most popular stock in this table. On the other hand Shinhan Financial Group Co., Ltd. (NYSE:SHG) is the least popular one with only 7 bullish hedge fund positions. Regions Financial Corporation (NYSE:RF) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for RF is 39.4. 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. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.3% in 2021 through April 19th and still beat the market by 0.9 percentage points. A small number of hedge funds were also right about betting on RF as the stock returned 30.6% since the end of the fourth quarter (through 4/19) and outperformed the market by an even larger margin.

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