Should You Avoid Royal Caribbean Cruises Ltd. (RCL)?

The Insider Monkey team has completed processing the quarterly 13F filings for the September quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors endured a torrid quarter, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Royal Caribbean Cruises Ltd. (NYSE:RCL).

Is Royal Caribbean Cruises Ltd. (NYSE:RCL) a good investment? The smart money is in a slightly pessimistic mood. The number of long hedge fund bets retreated by 2 lately. RCL was in 41 hedge funds’ portfolios at the end of September. There were 43 hedge funds in our database with RCL positions at the end of the previous quarter. 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 Consolidated Edison, Inc. (NYSE:ED), Ameriprise Financial, Inc. (NYSE:AMP), and Cummins Inc. (NYSE:CMI) to gather more data points.

In the eyes of most investors, hedge funds are perceived as slow, outdated financial tools of years past. While there are greater than 8000 funds with their doors open today, We hone in on the leaders of this group, about 700 funds. It is estimated that this group of investors oversee bulk of the smart money’s total asset base, and by following their unrivaled investments, Insider Monkey has spotted numerous investment strategies that have historically beaten the S&P 500 index. Insider Monkey’s small-cap hedge fund strategy outperformed the S&P 500 index by 12 percentage points annually for a decade in their back tests.

With all of this in mind, let’s go over the fresh action surrounding Royal Caribbean Cruises Ltd. (NYSE:RCL).

What have hedge funds been doing with Royal Caribbean Cruises Ltd. (NYSE:RCL)?

Heading into Q4, a total of 41 of the hedge funds tracked by Insider Monkey were long this stock, a change of -5% from the second quarter. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Columbus Circle Investors, managed by Clifford Fox, holds the largest position in Royal Caribbean Cruises Ltd. (NYSE:RCL). Columbus Circle Investors has a $187.1 million position in the stock, comprising 1.5% of its 13F portfolio. The second largest stake is held by Altimeter Capital Management, led by Brad Gerstner, holding a $110.6 million position; the fund has 7.1% of its 13F portfolio invested in the stock. Some other members of the smart money that hold long positions include Cliff Asness’s AQR Capital Management, Brett Barakett’s Tremblant Capital and Ken Griffin’s Citadel Investment Group.

Due to the fact that Royal Caribbean Cruises Ltd. (NYSE:RCL) has faced declining sentiment from hedge fund managers, it’s easy to see that there lies a certain “tier” of hedgies that elected to cut their entire stakes in the third quarter. Intriguingly, Richard Barrera’s Roystone Capital Partners dropped the largest position of the 700 funds followed by Insider Monkey, totaling about $126 million in stock, and Aaron Cowen’s Suvretta Capital Management was right behind this move, as the fund dropped about $44.6 million worth. These bearish behaviors are important to note, as total hedge fund interest fell by 2 funds in the third quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Royal Caribbean Cruises Ltd. (NYSE:RCL). We will take a look at Consolidated Edison, Inc. (NYSE:ED), Ameriprise Financial, Inc. (NYSE:AMP), Cummins Inc. (NYSE:CMI), and CBS Corporation (NYSE:CBS). All of these stocks’ market caps are similar to RCL’s market cap.

As you can see these stocks had an average of 37 hedge funds with bullish positions and the average amount invested in these stocks was $1.32 billion. That figure was $1.19 billion in RCL’s case. CBS Corporation (NYSE:CBS) is the most popular stock in this table. On the other hand Consolidated Edison, Inc. (NYSE:ED) is the least popular one with only 14 bullish hedge fund positions. Royal Caribbean Cruises Ltd. (NYSE:RCL) 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. In this regard CBS might be a better candidate to consider a long position.