Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the fourth quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of RH (NYSE:RH) based on that data.
Is RH stock a buy or sell? RH (NYSE:RH) was in 42 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 40. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. RH investors should be aware of an increase in hedge fund sentiment lately. There were 40 hedge funds in our database with RH positions at the end of the third quarter. Our calculations also showed that RH 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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017 (see the details here).
Dan Loeb of Third Point
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 10 best battery stocks to buy 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. Now let’s take a peek at the fresh hedge fund action regarding RH (NYSE:RH).
Do Hedge Funds Think RH Is A Good Stock To Buy Now?
At Q4’s end, a total of 42 of the hedge funds tracked by Insider Monkey were long this stock, a change of 5% from the previous quarter. On the other hand, there were a total of 38 hedge funds with a bullish position in RH a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were upping their holdings substantially (or already accumulated large positions).
The largest stake in RH (NYSE:RH) was held by Berkshire Hathaway, which reported holding $775.4 million worth of stock at the end of December. It was followed by D1 Capital Partners with a $507.2 million position. Other investors bullish on the company included Pelham Capital, Third Point, and Woodson Capital Management. In terms of the portfolio weights assigned to each position Pelham Capital allocated the biggest weight to RH (NYSE:RH), around 8.49% of its 13F portfolio. Rip Road Capital is also relatively very bullish on the stock, dishing out 5.52 percent of its 13F equity portfolio to RH.
With a general bullishness amongst the heavyweights, some big names have jumped into RH (NYSE:RH) headfirst. Pelham Capital, managed by Ross Turner, assembled the most outsized position in RH (NYSE:RH). Pelham Capital had $128.2 million invested in the company at the end of the quarter. Dan Loeb’s Third Point also initiated a $115.7 million position during the quarter. The following funds were also among the new RH investors: Brian Scudieri’s Kehrs Ridge Capital, Paul Marshall and Ian Wace’s Marshall Wace LLP, and Peter Avellone’s Cartenna Capital.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as RH (NYSE:RH) but similarly valued. We will take a look at Coca-Cola FEMSA, S.A.B. de C.V. (NYSE:KOF), Shaw Communications Inc (NYSE:SJR), The Western Union Company (NYSE:WU), Flex Ltd. (NASDAQ:FLEX), Newell Brands Inc. (NYSE:NWL), Pinnacle West Capital Corporation (NYSE:PNW), and WEX Inc (NYSE:WEX). This group of stocks’ market caps are similar to RH’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| KOF | 6 | 384456 | 0 |
| SJR | 19 | 143455 | 6 |
| WU | 29 | 491046 | -7 |
| FLEX | 44 | 1373056 | 17 |
| NWL | 23 | 1529633 | -4 |
| PNW | 24 | 331462 | 2 |
| WEX | 26 | 422739 | 0 |
| Average | 24.4 | 667978 | 2 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.4 hedge funds with bullish positions and the average amount invested in these stocks was $668 million. That figure was $1926 million in RH’s case. Flex Ltd. (NASDAQ:FLEX) is the most popular stock in this table. On the other hand Coca-Cola FEMSA, S.A.B. de C.V. (NYSE:KOF) is the least popular one with only 6 bullish hedge fund positions. RH (NYSE:RH) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for RH is 84.4. 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 5.3% in 2021 through March 19th and still beat the market by 0.8 percentage points. Hedge funds were also right about betting on RH as the stock returned 15.2% since the end of Q4 (through 3/19) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.
