Were Hedge Funds Right About Ralph Lauren Corporation (RL)?

In this article you are going to find out whether hedge funds think Ralph Lauren Corporation (NYSE:RL) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Is Ralph Lauren Corporation (NYSE:RL) a buy, sell, or hold? Money managers were turning less bullish. The number of bullish hedge fund bets dropped by 2 in recent months. Ralph Lauren Corporation (NYSE:RL) was in 32 hedge funds’ portfolios at the end of June. The all time high for this statistic is 39. Our calculations also showed that RL isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 34 hedge funds in our database with RL positions at the end of the first quarter.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 79 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Phillip Gross of Adage 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 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 take a look at the key hedge fund action regarding Ralph Lauren Corporation (NYSE:RL).

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

Heading into the third quarter of 2021, a total of 32 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -6% from the previous quarter. By comparison, 25 hedge funds held shares or bullish call options in RL a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Ralph Lauren Corporation (NYSE:RL) was held by Adage Capital Management, which reported holding $111.8 million worth of stock at the end of June. It was followed by Scopus Asset Management with a $90.9 million position. Other investors bullish on the company included Royce & Associates, Millennium Management, and Two Sigma Advisors. In terms of the portfolio weights assigned to each position Hickory Lane Capital Management allocated the biggest weight to Ralph Lauren Corporation (NYSE:RL), around 2.3% of its 13F portfolio. Hickory Lane Capital Management is also relatively very bullish on the stock, earmarking 1.93 percent of its 13F equity portfolio to RL.

Because Ralph Lauren Corporation (NYSE:RL) has faced bearish sentiment from the smart money, logic holds that there exists a select few hedge funds who were dropping their full holdings in the second quarter. Interestingly, Steven Boyd’s Armistice Capital cut the largest stake of the “upper crust” of funds monitored by Insider Monkey, worth close to $35.8 million in stock, and Dmitry Balyasny’s Balyasny Asset Management was right behind this move, as the fund sold off about $30.6 million worth. These moves are intriguing to say the least, as total hedge fund interest dropped by 2 funds in the second quarter.

Let’s go over hedge fund activity in other stocks similar to Ralph Lauren Corporation (NYSE:RL). These stocks are Capri Holdings Limited (NYSE:CPRI), Jabil Inc. (NYSE:JBL), Ares Capital Corporation (NASDAQ:ARCC), Arrowhead Pharmaceuticals Inc. (NASDAQ:ARWR), Skillz Inc. (NYSE:SKLZ), Kohl’s Corporation (NYSE:KSS), and Oshkosh Corporation (NYSE:OSK). This group of stocks’ market caps are similar to RL’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 28.6 hedge funds with bullish positions and the average amount invested in these stocks was $649 million. That figure was $691 million in RL’s case. Capri Holdings Limited (NYSE:CPRI) is the most popular stock in this table. On the other hand Ares Capital Corporation (NASDAQ:ARCC) is the least popular one with only 12 bullish hedge fund positions. Ralph Lauren Corporation (NYSE:RL) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for RL is 58.9. 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. 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 through November 5th and still beat the market by 3.1 percentage points. Hedge funds were also right about betting on RL as the stock returned 8.9% since the end of Q2 (through 11/5) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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