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How Did Raymond James Financial, Inc. (RJF) Compare Against Hedge Fund Darlings in 2019?

Asma UL Husna

We are still in an overall bull market and many stocks that smart money investors were piling into surged in 2019. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained more than 57% each. Hedge funds' top 3 stock picks returned 45.7% last year and beat the S&P 500 ETFs by more than 14 percentage points. That's a big deal. This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.

Is Raymond James Financial, Inc. (NYSE:RJF) worth your attention right now? Investors who are in the know are taking a pessimistic view. The number of bullish hedge fund positions retreated by 8 lately. Our calculations also showed that RJF isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

[caption id="attachment_192997" align="aligncenter" width="450"] Glenn Greenberg of Brave Warrior Capital[/caption]

Glenn Greenberg

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world's largest cannabis market, so we check out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock is still extremely cheap despite already gaining 20 percent. With all of this in mind let's check out the fresh hedge fund action surrounding Raymond James Financial, Inc. (NYSE:RJF).

What have hedge funds been doing with Raymond James Financial, Inc. (NYSE:RJF)?

At Q3's end, a total of 27 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -23% from one quarter earlier. By comparison, 31 hedge funds held shares or bullish call options in RJF a year ago. With hedge funds' positions undergoing their usual ebb and flow, there exists an "upper tier" of notable hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).

More specifically, Brave Warrior Capital was the largest shareholder of Raymond James Financial, Inc. (NYSE:RJF), with a stake worth $212.3 million reported as of the end of September. Trailing Brave Warrior Capital was Eminence Capital, which amassed a stake valued at $164.5 million. Fisher Asset Management, Millennium Management, and RR Partners 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 Brave Warrior Capital allocated the biggest weight to Raymond James Financial, Inc. (NYSE:RJF), around 11.33% of its 13F portfolio. RR Partners is also relatively very bullish on the stock, dishing out 5.86 percent of its 13F equity portfolio to RJF.

Seeing as Raymond James Financial, Inc. (NYSE:RJF) has faced bearish sentiment from the aggregate hedge fund industry, we can see that there exists a select few fund managers who sold off their full holdings in the third quarter. Intriguingly, Dmitry Balyasny's Balyasny Asset Management said goodbye to the largest stake of the "upper crust" of funds watched by Insider Monkey, valued at an estimated $79.2 million in stock, and Daniel Johnson's Gillson Capital was right behind this move, as the fund dropped about $12.2 million worth. These transactions are important to note, as total hedge fund interest was cut by 8 funds in the third quarter.

Let's go over hedge fund activity in other stocks similar to Raymond James Financial, Inc. (NYSE:RJF). These stocks are Arconic Inc. (NYSE:ARNC), Yandex NV (NASDAQ:YNDX), FMC Corporation (NYSE:FMC), and InterContinental Hotels Group PLC (NYSE:IHG). All of these stocks' market caps are similar to RJF's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ARNC,34,3136590,-8 YNDX,35,809543,5 FMC,36,788705,0 IHG,7,29788,3 Average,28,1191157,0 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 28 hedge funds with bullish positions and the average amount invested in these stocks was $1191 million. That figure was $793 million in RJF's case. FMC Corporation (NYSE:FMC) is the most popular stock in this table. On the other hand InterContinental Hotels Group PLC (NYSE:IHG) is the least popular one with only 7 bullish hedge fund positions. Raymond James Financial, Inc. (NYSE:RJF) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Unfortunately RJF wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); RJF investors were disappointed as the stock returned 22.8% in 2019 and trailed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 65 percent of these stocks already outperformed the market in 2019. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

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

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