Sturm, Ruger & Company, Inc. (RGR) Fell Out Of Favor With Hedge Funds

Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Sturm, Ruger & Company, Inc. (NYSE:RGR).

Sturm, Ruger & Company, Inc. (NYSE:RGR) has experienced a decrease in support from the world’s most elite money managers lately. Sturm, Ruger & Company, Inc. (NYSE:RGR) was in 19 hedge funds’ portfolios at the end of June. The all time high for this statistic is 27. Our calculations also showed that RGR isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

If you’d ask most market participants, hedge funds are seen as worthless, old financial vehicles of years past. While there are over 8000 funds with their doors open at present, We hone in on the top tier of this club, approximately 850 funds. These investment experts manage bulk of the hedge fund industry’s total asset base, and by tracking their matchless equity investments, Insider Monkey has determined a number of investment strategies that have historically outperformed Mr. Market. Insider Monkey’s flagship short hedge fund strategy surpassed the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Also, our monthly newsletter’s portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website.

Matthew Hulsizer of PEAK6 Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, plant based food market is expected to explode 100-fold by 2050, so we are checking out this stock pitch. We go through lists like the 10 best growth stocks to buy 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 key hedge fund action surrounding Sturm, Ruger & Company, Inc. (NYSE:RGR).

Do Hedge Funds Think RGR Is A Good Stock To Buy Now?

At the end of June, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -10% from the previous quarter. The graph below displays the number of hedge funds with bullish position in RGR over the last 24 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Renaissance Technologies held the most valuable stake in Sturm, Ruger & Company, Inc. (NYSE:RGR), which was worth $100.1 million at the end of the second quarter. On the second spot was Arrowstreet Capital which amassed $29.7 million worth of shares. PEAK6 Capital Management, Citadel Investment Group, and Citadel Investment Group 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 Plaisance Capital allocated the biggest weight to Sturm, Ruger & Company, Inc. (NYSE:RGR), around 1.02% of its 13F portfolio. Navellier & Associates is also relatively very bullish on the stock, setting aside 0.17 percent of its 13F equity portfolio to RGR.

Judging by the fact that Sturm, Ruger & Company, Inc. (NYSE:RGR) has experienced a decline in interest from the entirety of the hedge funds we track, we can see that there lies a certain “tier” of fund managers who were dropping their full holdings by the end of the second quarter. Intriguingly, Michael Gelband’s ExodusPoint Capital dumped the largest position of the “upper crust” of funds followed by Insider Monkey, comprising an estimated $1 million in stock, and Qing Li’s Sciencast Management was right behind this move, as the fund dumped about $0.3 million worth. These bearish behaviors are important to note, as total hedge fund interest dropped by 2 funds by the end of the second quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Sturm, Ruger & Company, Inc. (NYSE:RGR) but similarly valued. We will take a look at Danaos Corporation (NYSE:DAC), Primoris Services Corp (NASDAQ:PRIM), Heron Therapeutics Inc (NASDAQ:HRTX), Cortexyme, Inc. (NASDAQ:CRTX), Forterra, Inc. (NASDAQ:FRTA), COMPASS Pathways Plc (NASDAQ:CMPS), and Encore Wire Corporation (NASDAQ:WIRE). This group of stocks’ market valuations are closest to RGR’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 15.4 hedge funds with bullish positions and the average amount invested in these stocks was $143 million. That figure was $169 million in RGR’s case. Encore Wire Corporation (NASDAQ:WIRE) is the most popular stock in this table. On the other hand Cortexyme, Inc. (NASDAQ:CRTX) is the least popular one with only 9 bullish hedge fund positions. Sturm, Ruger & Company, Inc. (NYSE:RGR) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for RGR is 69.6. 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% in 2021 through October 22nd and beat the market again by 1.6 percentage points. Unfortunately RGR wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on RGR were disappointed as the stock returned -10.3% 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 many of these stocks already outperformed the market since 2019.

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Disclosure: None. This article was originally published at Insider Monkey.