Hedge funds run by legendary names like Nelson Peltz and David Tepper make billions of dollars a year for themselves and their super-rich accredited investors (you’ve got to have a minimum of $1 million liquid to invest in a hedge fund) by spending enormous resources on analyzing and uncovering data about small-cap stocks that the big brokerage houses don’t follow. Small caps are where they can generate significant out-performance. These stocks have been on a tear since the end of June, outperforming large-cap index funds by more than 10 percentage points. That’s why we pay special attention to hedge fund activity in these stocks.
One stock that saw an increase in popularity among smart money investors last quarter is RPC, Inc. (NYSE:RES). At the end of September, 22 funds from our database held shares of the company, compared to 20 funds a quarter earlier. 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 National Instruments Corp (NASDAQ:NATI), PrivateBancorp Inc (NASDAQ:PVTB), and American Capital Ltd. (NASDAQ:ACAS) 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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Now, let’s take a peek at the fresh action regarding RPC, Inc. (NYSE:RES).
Hedge fund activity in RPC, Inc. (NYSE:RES)
A total of 22 of the hedge funds tracked by Insider Monkey were long RPC, Inc. (NYSE:RES) at the end of September, up by 10% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards RES over the last five quarters. With hedgies’ capital changing hands, there exists a few notable hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Mario Gabelli’s GAMCO Investors has the biggest position in RPC, Inc. (NYSE:RES), worth close to $85.1 million, amounting to 0.6% of its total 13F portfolio. The second largest stake is held by Israel Englander’s Millennium Management, holding a $63.9 million position; 0.1% of its 13F portfolio is allocated to the stock. Remaining peers that hold long positions consist of Ken Griffin’s Citadel Investment Group and Till Bechtolsheimer’s Arosa Capital Management. We should note that Arosa Capital Management is 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.
Now, specific money managers have been driving this bullishness. Graham Capital Management, led by Kenneth Tropin, created the biggest position in RPC, Inc. (NYSE:RES). Graham Capital Management had $12.9 million invested in the company at the end of the quarter. Todd J. Kantor’s Encompass Capital Advisors also initiated a $11.3 million position during the quarter. The other funds with brand new RES positions are Vince Maddi and Shawn Brennan’s SIR Capital Management, Paul Marshall and Ian Wace’s Marshall Wace LLP, and Michael Platt and William Reeves’ BlueCrest Capital Mgmt..
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as RPC, Inc. (NYSE:RES) but similarly valued. These stocks are National Instruments Corp (NASDAQ:NATI), PrivateBancorp Inc (NASDAQ:PVTB), American Capital Ltd. (NASDAQ:ACAS), and HEALTHSOUTH Corp. (NYSE:HLS). This group of stocks’ market values match RES’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NATI | 24 | 372551 | 2 |
| PVTB | 23 | 551096 | -3 |
| ACAS | 28 | 600404 | -6 |
| HLS | 22 | 543448 | -3 |
As you can see these stocks had an average of 24 funds with bullish positions and the average amount invested in these stocks was $517 million, compared to $317 million in RES’s case. American Capital Ltd. (NASDAQ:ACAS) is the most popular stock in this table, while HEALTHSOUTH Corp. (NYSE:HLS) is the least popular one with only 22 bullish hedge fund positions. Compared to these stocks RPC, Inc. (NYSE:RES) has the same number of funds with long positions as HEALTHSOUTH Corp. (NYSE:HLS). Considering that hedge funds aren’t very fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.
Disclosure: none
