There are several ways to beat the market, and investing in small cap stocks has historically been one of them. We like to improve the odds of beating the market further by examining what famous hedge fund operators such as Carl Icahn and George Soros think. Those hedge fund operators make billions of dollars each year by hiring the best and the brightest to do research on stocks, including small cap stocks that big brokerage houses simply don’t cover. Because of Carl Icahn and other successful funds’ exemplary historical records, we pay attention to their small cap picks. In this article, we use hedge fund filing data to analyze Resources Connection, Inc. (NASDAQ:RECN).
There were 16 hedge funds in our database with long positions in Resources Connection, Inc. (NASDAQ:RECN) at the end of September. The company saw an increase in popularity, as there had been 12 funds bullish on the stock a quarter earlier. However, 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 Hemisphere Media Group Inc (NASDAQ:HMTV), Bryn Mawr Bank Corp. (NASDAQ:BMTC), and Triple-S Management Corp.(NYSE:GTS) to gather more data points.
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We follow over 700 hedge funds and other institutional investors and by analyzing their quarterly 13F filings, we identify stocks that they are collectively bullish on and develop investment strategies based on this data. One strategy that outperformed the market over the last year involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively most bullish on. Over the past year, this strategy generated returns of 18%, topping the 8% gain registered by S&P 500 ETFs. We launched this strategy 2.5 years ago and it returned more than 39% since then, vs. 22% gain registered by the S&P 500 ETFs.
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Keeping this in mind, let’s go over the fresh action encompassing Resources Connection, Inc. (NASDAQ:RECN).
What have hedge funds been doing with Resources Connection, Inc. (NASDAQ:RECN)?
At the end of the third quarter, a total of 16 of the hedge funds tracked by Insider Monkey were bullish on Resources Connection, a change of 33% from the second quarter of 2016. By comparison, 13 hedge funds held shares or bullish call options in RECN heading into 2016. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Chuck Royce’s Royce & Associates has the biggest position in Resources Connection, Inc. (NASDAQ:RECN), worth close to $40.1 million, comprising 0.3% of its total 13F portfolio. On Royce & Associates’s heels is Cliff Asness of AQR Capital Management, with a $5.8 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining professional money managers that are bullish comprise Renaissance Technologies, one of the biggest hedge funds in the world, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, and Ken Fisher’s Fisher Asset 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-microcap stocks.
Consequently, specific money managers were breaking ground themselves. Highbridge Capital Management, led by Glenn Russell Dubin, assembled the most valuable position in Resources Connection, Inc. (NASDAQ:RECN). Highbridge Capital Management had $0.4 million invested in the company at the end of the quarter. James Dondero’s Highland Capital Management also made a $0.3 million investment in the stock during the quarter. The following funds were also among the new RECN investors: Neil Chriss’ Hutchin Hill Capital and David Costen Haley’s HBK Investments.
Let’s also examine hedge fund activity in other stocks similar to Resources Connection, Inc. (NASDAQ:RECN). We will take a look at Hemisphere Media Group Inc (NASDAQ:HMTV), Bryn Mawr Bank Corp. (NASDAQ:BMTC), Triple-S Management Corp.(NYSE:GTS), and Bellicum Pharmaceuticals Inc (NASDAQ:BLCM). This group of stocks’ market valuations are similar to RECN’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HMTV | 9 | 57380 | -1 |
| BMTC | 11 | 43505 | 3 |
| GTS | 10 | 88928 | -3 |
| BLCM | 3 | 104833 | -1 |
As you can see these stocks had an average of eight funds with bullish positions and the average amount invested in these stocks was $74 million. That figure was $63 million in RECN’s case. Bryn Mawr Bank Corp. (NASDAQ:BMTC) is the most popular stock in this table. On the other hand Bellicum Pharmaceuticals Inc (NASDAQ:BLCM) is the least popular one with only three bullish hedge fund positions. Compared to these stocks Resources Connection, Inc. (NASDAQ:RECN) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
Disclosure: none
