The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on March 31st, about a week after the S&P 500 Index bottomed. We at Insider Monkey have made an extensive database of more than 821 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded Ralph Lauren Corporation (NYSE:RL) based on those filings.
Ralph Lauren Corporation (NYSE:RL) has experienced a decrease in support from the world’s most elite money managers lately. Our calculations also showed that RL isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
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 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Donald Yacktman of Yacktman Asset Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to go over the fresh hedge fund action encompassing Ralph Lauren Corporation (NYSE:RL).
How have hedgies been trading Ralph Lauren Corporation (NYSE:RL)?
At Q1’s end, a total of 26 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -30% from the fourth quarter of 2019. On the other hand, there were a total of 34 hedge funds with a bullish position in RL a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Renaissance Technologies was the largest shareholder of Ralph Lauren Corporation (NYSE:RL), with a stake worth $249.2 million reported as of the end of September. Trailing Renaissance Technologies was Yacktman Asset Management, which amassed a stake valued at $50 million. AQR Capital Management, Gotham Asset Management, and Arrowstreet Capital 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 Yacktman Asset Management allocated the biggest weight to Ralph Lauren Corporation (NYSE:RL), around 0.83% of its 13F portfolio. Cinctive Capital Management is also relatively very bullish on the stock, setting aside 0.34 percent of its 13F equity portfolio to RL.
Judging by the fact that Ralph Lauren Corporation (NYSE:RL) has experienced a decline in interest from hedge fund managers, logic holds that there were a few hedgies who sold off their full holdings by the end of the first quarter. At the top of the heap, Paul Marshall and Ian Wace’s Marshall Wace LLP dropped the biggest investment of the 750 funds monitored by Insider Monkey, comprising an estimated $39.7 million in stock. Kamyar Khajavi’s fund, MIK Capital, also dropped its stock, about $19.4 million worth. These bearish behaviors are interesting, as total hedge fund interest fell by 11 funds by the end of the first quarter.
Let’s now take a look at hedge fund activity in other stocks similar to Ralph Lauren Corporation (NYSE:RL). These stocks are Lear Corporation (NYSE:LEA), Smartsheet Inc. (NYSE:SMAR), Westlake Chemical Corporation (NYSE:WLK), and Donaldson Company, Inc. (NYSE:DCI). All of these stocks’ market caps are similar to RL’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| LEA | 28 | 581083 | -1 |
| SMAR | 41 | 1678822 | -3 |
| WLK | 20 | 111151 | -2 |
| DCI | 20 | 125557 | -1 |
| Average | 27.25 | 624153 | -1.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 27.25 hedge funds with bullish positions and the average amount invested in these stocks was $624 million. That figure was $403 million in RL’s case. Smartsheet Inc. (NYSE:SMAR) is the most popular stock in this table. On the other hand Westlake Chemical Corporation (NYSE:WLK) is the least popular one with only 20 bullish hedge fund positions. Ralph Lauren Corporation (NYSE:RL) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May and surpassed the market by 13.2 percentage points. Unfortunately RL wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); RL investors were disappointed as the stock returned 13% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.
