The financial regulations require hedge funds and wealthy investors that exceeded the $100 million holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on June 30th. We at Insider Monkey have made an extensive database of more than 873 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded RPM International Inc. (NYSE:RPM) based on those filings.
Is RPM International Inc. (NYSE:RPM) ready to rally soon? Money managers were getting more bullish. The number of long hedge fund bets rose by 2 in recent months. RPM International Inc. (NYSE:RPM) was in 22 hedge funds’ portfolios at the end of June. The all time high for this statistic is 34. Our calculations also showed that RPM isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 20 hedge funds in our database with RPM holdings at the end of March.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.
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. Keeping this in mind let’s go over the new hedge fund action encompassing RPM International Inc. (NYSE:RPM).
Do Hedge Funds Think RPM Is A Good Stock To Buy Now?
At the end of June, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of 10% from the previous quarter. On the other hand, there were a total of 26 hedge funds with a bullish position in RPM a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
More specifically, Arrowstreet Capital was the largest shareholder of RPM International Inc. (NYSE:RPM), with a stake worth $17.7 million reported as of the end of June. Trailing Arrowstreet Capital was Renaissance Technologies, which amassed a stake valued at $16 million. Millennium Management, Bridgewater Associates, and Holocene Advisors 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 Neo Ivy Capital allocated the biggest weight to RPM International Inc. (NYSE:RPM), around 0.76% of its 13F portfolio. Prescott Group Capital Management is also relatively very bullish on the stock, designating 0.19 percent of its 13F equity portfolio to RPM.
Now, key money managers were breaking ground themselves. Tudor Investment Corp, managed by Paul Tudor Jones, created the biggest position in RPM International Inc. (NYSE:RPM). Tudor Investment Corp had $4.6 million invested in the company at the end of the quarter. Alec Litowitz and Ross Laser’s Magnetar Capital also initiated a $1.6 million position during the quarter. The following funds were also among the new RPM investors: Mika Toikka’s AlphaCrest Capital Management and Renee Yao’s Neo Ivy Capital.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as RPM International Inc. (NYSE:RPM) but similarly valued. These stocks are Axovant Sciences Ltd (NYSE:AXON), Sunrun Inc (NASDAQ:RUN), Sprint Corporation (NYSE:S), Pegasystems Inc. (NASDAQ:PEGA), Cree, Inc. (NASDAQ:CREE), IPG Photonics Corporation (NASDAQ:IPGP), and Essential Utilities Inc (NYSE:WTRG). This group of stocks’ market valuations resemble RPM’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AXON | 24 | 513588 | -7 |
| RUN | 45 | 2517525 | 4 |
| S | 67 | 2062506 | 67 |
| PEGA | 27 | 2029409 | -8 |
| CREE | 31 | 391130 | 1 |
| IPGP | 23 | 399842 | -8 |
| WTRG | 13 | 272737 | -6 |
| Average | 32.9 | 1169534 | 6.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 32.9 hedge funds with bullish positions and the average amount invested in these stocks was $1170 million. That figure was $92 million in RPM’s case. Sprint Corporation (NYSE:S) is the most popular stock in this table. On the other hand Essential Utilities Inc (NYSE:WTRG) is the least popular one with only 13 bullish hedge fund positions. RPM International Inc. (NYSE:RPM) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for RPM is 34.7. 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 negative signal and 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% in 2021 through October 22nd and surpassed the market again by 1.6 percentage points. Unfortunately RPM wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); RPM investors were disappointed as the stock returned 0.8% since the end of June (through 10/22) 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 most of these stocks already outperformed the market in 2021.
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Disclosure: None. This article was originally published at Insider Monkey.
