How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Royal Caribbean Cruises Ltd. (NYSE:RCL) and determine whether hedge funds had an edge regarding this stock.
Royal Caribbean Cruises Ltd. (NYSE:RCL) has experienced a decrease in activity from the world’s largest hedge funds of late. Royal Caribbean Cruises Ltd. (NYSE:RCL) was in 35 hedge funds’ portfolios at the end of September. The all time high for this statistic is 52. There were 42 hedge funds in our database with RCL positions at the end of the second quarter. Our calculations also showed that RCL isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).
Michael Lowenstein of Kensico Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so 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. With all of this in mind we’re going to take a glance at the latest hedge fund action encompassing Royal Caribbean Cruises Ltd. (NYSE:RCL).
Do Hedge Funds Think RCL Is A Good Stock To Buy Now?
At the end of September, a total of 35 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -17% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards RCL over the last 25 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Royal Caribbean Cruises Ltd. (NYSE:RCL) was held by Citadel Investment Group, which reported holding $301 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $92.4 million position. Other investors bullish on the company included Candlestick Capital Management, Columbus Hill Capital Management, and Candlestick Capital Management. In terms of the portfolio weights assigned to each position Columbus Hill Capital Management allocated the biggest weight to Royal Caribbean Cruises Ltd. (NYSE:RCL), around 5.23% of its 13F portfolio. Proem Advisors is also relatively very bullish on the stock, designating 3.01 percent of its 13F equity portfolio to RCL.
Because Royal Caribbean Cruises Ltd. (NYSE:RCL) has witnessed a decline in interest from the entirety of the hedge funds we track, it’s easy to see that there is a sect of hedgies that elected to cut their positions entirely in the third quarter. Interestingly, Stuart J. Zimmer’s Zimmer Partners sold off the largest investment of all the hedgies followed by Insider Monkey, worth about $48 million in stock, and Brett Barakett’s Tremblant Capital was right behind this move, as the fund dropped about $40.5 million worth. These bearish behaviors are interesting, as total hedge fund interest fell by 7 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). These stocks are Magna International Inc. (NYSE:MGA), CNH Industrial NV (NYSE:CNHI), Extra Space Storage, Inc. (NYSE:EXR), Northern Trust Corporation (NASDAQ:NTRS), XP Inc. (NASDAQ:XP), Vulcan Materials Company (NYSE:VMC), and Alnylam Pharmaceuticals, Inc. (NASDAQ:ALNY). All of these stocks’ market caps resemble RCL’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MGA | 29 | 444703 | -10 |
| CNHI | 25 | 909259 | 1 |
| EXR | 27 | 405036 | 6 |
| NTRS | 34 | 535076 | 2 |
| XP | 28 | 674196 | 3 |
| VMC | 43 | 1923351 | 0 |
| ALNY | 40 | 1030395 | 7 |
| Average | 32.3 | 846002 | 1.3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 32.3 hedge funds with bullish positions and the average amount invested in these stocks was $846 million. That figure was $575 million in RCL’s case. Vulcan Materials Company (NYSE:VMC) is the most popular stock in this table. On the other hand CNH Industrial NV (NYSE:CNHI) is the least popular one with only 25 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. Our overall hedge fund sentiment score for RCL is 46. 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 29.6% in 2021 and beat the market again by 3.6 percentage points. Unfortunately, RCL wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on RCL were disappointed as the stock returned -12.5% since the end of September (through 1/31) 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 all of these stocks already outperformed the market since 2019.
Follow Royal Caribbean Cruises Ltd (NYSE:RCL)
Follow Royal Caribbean Cruises Ltd (NYSE:RCL)
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Disclosure: None. This article was originally published at Insider Monkey.
