In this article you are going to find out whether hedge funds think Reliance Steel & Aluminum Co. (NYSE:RS) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Is Reliance Steel & Aluminum Co. (NYSE:RS) the right pick for your portfolio? Investors who are in the know were getting more bullish. The number of long hedge fund bets advanced by 9 recently. Reliance Steel & Aluminum Co. (NYSE:RS) was in 27 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 34. Our calculations also showed that RS isn’t among the 30 most popular stocks among hedge funds (click for Q2 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 79 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Noam Gottesman of GLG Partners
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With all of this in mind let’s go over the fresh hedge fund action regarding Reliance Steel & Aluminum Co. (NYSE:RS).
Do Hedge Funds Think RS Is A Good Stock To Buy Now?
At second quarter’s end, a total of 27 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 50% from one quarter earlier. On the other hand, there were a total of 27 hedge funds with a bullish position in RS a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Royce & Associates, managed by Chuck Royce, holds the biggest position in Reliance Steel & Aluminum Co. (NYSE:RS). Royce & Associates has a $57.2 million position in the stock, comprising 0.4% of its 13F portfolio. On Royce & Associates’s heels is Scopus Asset Management, led by Alexander Mitchell, holding a $49.2 million position; 0.6% of its 13F portfolio is allocated to the stock. Other peers with similar optimism contain D. E. Shaw’s D E Shaw, Cliff Asness’s AQR Capital Management and Noam Gottesman’s GLG Partners. In terms of the portfolio weights assigned to each position Lodge Hill Capital allocated the biggest weight to Reliance Steel & Aluminum Co. (NYSE:RS), around 4.42% of its 13F portfolio. Scopus Asset Management is also relatively very bullish on the stock, setting aside 0.64 percent of its 13F equity portfolio to RS.
As aggregate interest increased, key hedge funds have jumped into Reliance Steel & Aluminum Co. (NYSE:RS) headfirst. Renaissance Technologies, created the largest position in Reliance Steel & Aluminum Co. (NYSE:RS). Renaissance Technologies had $5.2 million invested in the company at the end of the quarter. Michael Gelband’s ExodusPoint Capital also initiated a $2.1 million position during the quarter. The other funds with brand new RS positions are Paul Tudor Jones’s Tudor Investment Corp, Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors, and Steve Cohen’s Point72 Asset Management.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Reliance Steel & Aluminum Co. (NYSE:RS) but similarly valued. We will take a look at NiSource Inc. (NYSE:NI), Western Alliance Bancorporation (NYSE:WAL), Upstart Holdings, Inc. (NASDAQ:UPST), Americold Realty Trust (NYSE:COLD), First Horizon National Corporation (NYSE:FHN), Denali Therapeutics Inc. (NASDAQ:DNLI), and Braskem SA (NYSE:BAK). All of these stocks’ market caps resemble RS’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NI | 36 | 559849 | 8 |
| WAL | 28 | 188070 | 5 |
| UPST | 21 | 2135453 | 8 |
| COLD | 16 | 530325 | 0 |
| FHN | 27 | 151649 | 0 |
| DNLI | 22 | 300703 | -4 |
| BAK | 6 | 16591 | -2 |
| Average | 22.3 | 554663 | 2.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.3 hedge funds with bullish positions and the average amount invested in these stocks was $555 million. That figure was $274 million in RS’s case. NiSource Inc. (NYSE:NI) is the most popular stock in this table. On the other hand Braskem SA (NYSE:BAK) is the least popular one with only 6 bullish hedge fund positions. Reliance Steel & Aluminum Co. (NYSE:RS) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for RS is 68.8. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24.9% in 2021 through October 15th and beat the market again by 4.5 percentage points. Unfortunately RS wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on RS were disappointed as the stock returned -1.8% since the end of June (through 10/15) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.
