Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. At Insider Monkey, we pore over the filings of nearly 835 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of December 31. In this article, we will use that wealth of knowledge to determine whether or not Renasant Corporation (NASDAQ:RNST) makes for a good investment right now.
Is Renasant Corporation (NASDAQ:RNST) going to take off soon? The smart money is in an optimistic mood. The number of long hedge fund positions increased by 3 recently. Our calculations also showed that RNST isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by more than 41 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Israel Englander of Millennium Management
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. 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 S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s analyze the fresh hedge fund action surrounding Renasant Corporation (NASDAQ:RNST).
Hedge fund activity in Renasant Corporation (NASDAQ:RNST)
Heading into the first quarter of 2020, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 33% from one quarter earlier. On the other hand, there were a total of 13 hedge funds with a bullish position in RNST a year ago. With hedgies’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
More specifically, Millennium Management was the largest shareholder of Renasant Corporation (NASDAQ:RNST), with a stake worth $40.9 million reported as of the end of September. Trailing Millennium Management was Renaissance Technologies, which amassed a stake valued at $14.5 million. EJF Capital, D E Shaw, and Citadel Investment Group 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 EJF Capital allocated the biggest weight to Renasant Corporation (NASDAQ:RNST), around 0.6% of its 13F portfolio. Sciencast Management is also relatively very bullish on the stock, designating 0.14 percent of its 13F equity portfolio to RNST.
With a general bullishness amongst the heavyweights, specific money managers have been driving this bullishness. Millennium Management, managed by Israel Englander, established the biggest position in Renasant Corporation (NASDAQ:RNST). Millennium Management had $40.9 million invested in the company at the end of the quarter. Emanuel J. Friedman’s EJF Capital also initiated a $6 million position during the quarter. The other funds with new positions in the stock are Michael Gelband’s ExodusPoint Capital, Donald Sussman’s Paloma Partners, and Qing Li’s Sciencast Management.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Renasant Corporation (NASDAQ:RNST) but similarly valued. We will take a look at Coca-Cola Bottling Co. Consolidated (NASDAQ:COKE), SJW Corp. (NYSE:SJW), TowneBank (NASDAQ:TOWN), and Banner Corporation (NASDAQ:BANR). This group of stocks’ market values resemble RNST’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| COKE | 11 | 27470 | -3 |
| SJW | 11 | 145886 | -11 |
| TOWN | 6 | 51675 | -1 |
| BANR | 12 | 70714 | -3 |
| Average | 10 | 73936 | -4.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $74 million. That figure was $70 million in RNST’s case. Banner Corporation (NASDAQ:BANR) is the most popular stock in this table. On the other hand TowneBank (NASDAQ:TOWN) is the least popular one with only 6 bullish hedge fund positions. Renasant Corporation (NASDAQ:RNST) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 13.0% in 2020 through April 6th but beat the market by 4.2 percentage points. Unfortunately RNST wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on RNST were disappointed as the stock returned -34.6% during the same time period 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 many of these stocks already outperformed the market so far this year.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
