Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will 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 nearly 750 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Relx PLC (NYSE:RELX).
Relx PLC (NYSE:RELX) investors should be aware of an increase in support from the world’s most elite money managers of late. Our calculations also showed that RELX isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
Jim Simons of Renaissance Technologies
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. Keeping this in mind we’re going to review the recent hedge fund action encompassing Relx PLC (NYSE:RELX).
How are hedge funds trading Relx PLC (NYSE:RELX)?
Heading into the fourth quarter of 2019, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 100% from the second quarter of 2019. By comparison, 5 hedge funds held shares or bullish call options in RELX a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Renaissance Technologies held the most valuable stake in Relx PLC (NYSE:RELX), which was worth $66.3 million at the end of the third quarter. On the second spot was Arrowstreet Capital which amassed $34.6 million worth of shares. Millennium Management, Citadel Investment Group, and Qtron Investments 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 Qtron Investments allocated the biggest weight to Relx PLC (NYSE:RELX), around 0.19% of its 13F portfolio. Arrowstreet Capital is also relatively very bullish on the stock, designating 0.08 percent of its 13F equity portfolio to RELX.
Now, some big names were breaking ground themselves. Citadel Investment Group, managed by Ken Griffin, assembled the most valuable position in Relx PLC (NYSE:RELX). Citadel Investment Group had $0.7 million invested in the company at the end of the quarter. Ronald Hua’s Qtron Investments also made a $0.3 million investment in the stock during the quarter. The only other fund with a brand new RELX position is David E. Shaw’s D E Shaw.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Relx PLC (NYSE:RELX) but similarly valued. We will take a look at Phillips 66 (NYSE:PSX), Honda Motor Co Ltd (NYSE:HMC), Edwards Lifesciences Corporation (NYSE:EW), and Aon plc (NYSE:AON). This group of stocks’ market values match RELX’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PSX | 36 | 1315132 | -3 |
| HMC | 10 | 129921 | 3 |
| EW | 34 | 1384665 | 1 |
| AON | 42 | 2479390 | 8 |
| Average | 30.5 | 1327277 | 2.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 30.5 hedge funds with bullish positions and the average amount invested in these stocks was $1327 million. That figure was $106 million in RELX’s case. Aon plc (NYSE:AON) is the most popular stock in this table. On the other hand Honda Motor Co Ltd (NYSE:HMC) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Relx PLC (NYSE:RELX) is even less popular than HMC. Hedge funds dodged a bullet by taking a bearish stance towards RELX. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately RELX wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); RELX investors were disappointed as the stock returned 2.8% during the fourth quarter (through the end of November) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market so far in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
