At Insider Monkey we track the activity of some of the best-performing hedge funds like Appaloosa Management, Baupost, and Third Point because we determined that some of the stocks that they are collectively bullish on can help us generate returns above the broader indices. Out of thousands of stocks that hedge funds invest in, small-caps can provide the best returns over the long term due to the fact that these companies are less efficiently priced and are usually under the radars of mass-media, analysts and dumb money. This is why we follow the smart money moves in the small-cap space.
Relx NV (ADR) (NYSE:RENX) shares didn’t see a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 6 hedge funds’ portfolios at the end of September, same as at the end of June. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as NVIDIA Corporation (NASDAQ:NVDA), Barclays PLC (ADR) (NYSE:BCS), and Capital One Financial Corp. (NYSE:COF) to gather more data points.
We care about hedge fund sentiment because historically hedge funds’ stock picks delivered strong risk adjusted returns. There are certain segments of the market where hedge funds’ stock picks performed much better than its benchmarks. For instance, the 30 most popular mid-cap stocks among the best performing hedge funds returned 18% over the last 12 months outpacing S&P 500 Index by more than 10 percentage points. We developed this strategy 2.5 years ago and started sharing its picks in our quarterly newsletter. It bested the S&P 500 Index ETFs by delivering a solid 39% vs. 22% gain for its benchmarks.
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How are hedge funds trading Relx NV (ADR) (NYSE:RENX)?
Heading into the fourth quarter of 2016, a total of 6 of the hedge funds tracked by Insider Monkey were long this stock, unchanged from the previous quarter. The graph below displays the number of hedge funds with bullish positions in RENX over the last 5 quarters, which doubled in Q1, but has otherwise been flat throughout that time. With hedge funds’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital has the number one position in Relx NV (ADR) (NYSE:RENX), worth close to $9.7 million. The second largest stake is held by Renaissance Technologies, one of the largest hedge funds in the world, which has a $5.5 million position. Other members of the smart money with similar optimism comprise Israel Englander’s Millennium Management, John Overdeck and David Siegel’s Two Sigma Advisors, and Bart Baum’s Ionic Capital Management. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds, which is based on the performance of their 13F long positions in non-micro-cap stocks.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren’t any hedge funds dumping their holdings during the third quarter, there weren’t any hedge funds initiating brand new positions either. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven’t identified any viable catalysts that can attract investor attention.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Relx NV (ADR) (NYSE:RENX) but similarly valued. We will take a look at NVIDIA Corporation (NASDAQ:NVDA), Barclays PLC (ADR) (NYSE:BCS), Capital One Financial Corp. (NYSE:COF), and Infosys Ltd ADR (NYSE:INFY). All of these stocks’ market caps are similar to RENX’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NVDA | 51 | 1900101 | 1 |
| BCS | 14 | 235346 | -1 |
| COF | 40 | 1441069 | -6 |
| INFY | 20 | 822886 | -3 |
As you can see these stocks had an average of 31 hedge funds with bullish positions and the average amount invested in these stocks was $1.10 billion. That figure was just $19 million in RENX’s case. NVIDIA Corporation (NASDAQ:NVDA) is the most popular stock in this table. On the other hand Barclays PLC (ADR) (NYSE:BCS) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks Relx NV (ADR) (NYSE:RENX) is even less popular than BCS. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock.
Disclosure: None
