Hedge funds and other investment firms that we track manage billions of dollars of their wealthy clients' money, and needless to say, they are painstakingly thorough when analyzing where to invest this money, as their own wealth depends on it. Regardless of the various methods used by elite investors like David Tepper and Dan Loeb, the resources they expend are second-to-none. This is especially valuable when it comes to small-cap stocks, which is where they generate their strongest outperformance, as their resources give them a huge edge when it comes to studying these stocks compared to the average investor, which is why we intently follow their activity in the small-cap space.
Is Rogers Communications Inc. (NYSE:RCI) a buy here? The best stock pickers are taking a bearish view. The number of bullish hedge fund bets fell by 1 in recent months. Our calculations also showed that rci isn't among the 30 most popular stocks among hedge funds.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
We're going to take a peek at the key hedge fund action surrounding Rogers Communications Inc. (NYSE:RCI).
What have hedge funds been doing with Rogers Communications Inc. (NYSE:RCI)?
Heading into the fourth quarter of 2018, a total of 15 of the hedge funds tracked by Insider Monkey were long this stock, a change of -6% from the previous quarter. On the other hand, there were a total of 14 hedge funds with a bullish position in RCI at the beginning of this year. With hedge funds' positions undergoing their usual ebb and flow, there exists a select group of 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, GLG Partners, managed by Noam Gottesman, holds the most valuable position in Rogers Communications Inc. (NYSE:RCI). GLG Partners has a $193.6 million position in the stock, comprising 0.7% of its 13F portfolio. On GLG Partners's heels is Jim Simons of Renaissance Technologies, with a $133.1 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Other peers that are bullish encompass Cliff Asness's AQR Capital Management, Mario Gabelli's GAMCO Investors and John Overdeck and David Siegel's Two Sigma Advisors.
Because Rogers Communications Inc. (NYSE:RCI) has experienced bearish sentiment from the aggregate hedge fund industry, we can see that there exists a select few fund managers that slashed their positions entirely in the third quarter. Intriguingly, Stuart J. Zimmer's Zimmer Partners said goodbye to the biggest position of the 700 funds watched by Insider Monkey, valued at close to $35.6 million in stock, and Alec Litowitz and Ross Laser's Magnetar Capital was right behind this move, as the fund dropped about $1.1 million worth. These moves are intriguing to say the least, as total hedge fund interest fell by 1 funds in the third quarter.
Let's now review hedge fund activity in other stocks similar to Rogers Communications Inc. (NYSE:RCI). These stocks are PPL Corporation (NYSE:PPL), Devon Energy Corp (NYSE:DVN), Xilinx, Inc. (NASDAQ:XLNX), and Energy Transfer Equity, L.P. (NYSE:ETE). This group of stocks' market values are similar to RCI's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PPL,24,936980,0 DVN,47,1545079,1 XLNX,36,1523679,8 ETE,22,400005,6 Average,32.25,1101436,3.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 32.25 hedge funds with bullish positions and the average amount invested in these stocks was $1.10 billion. That figure was $451 million in RCI's case. Devon Energy Corp (NYSE:DVN) is the most popular stock in this table. On the other hand Energy Transfer Equity, L.P. (NYSE:ETE) is the least popular one with only 22 bullish hedge fund positions. Compared to these stocks Rogers Communications Inc. (NYSE:RCI) is even less popular than ETE. Considering that hedge funds aren't 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. This article was originally published at Insider Monkey.