Is Ryder System, Inc. (NYSE:R) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.
Is Ryder System, Inc. (NYSE:R) a healthy stock for your portfolio? The smart money is taking an optimistic view. The number of long hedge fund bets went up by 2 in recent months. Our calculations also showed that R isn't among the 30 most popular stocks among hedge funds (view the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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 40 percentage points since May 2014 through May 30, 2019 (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.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We're going to take a look at the new hedge fund action regarding Ryder System, Inc. (NYSE:R).
How are hedge funds trading Ryder System, Inc. (NYSE:R)?
Heading into the third quarter of 2019, a total of 21 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 11% from one quarter earlier. By comparison, 17 hedge funds held shares or bullish call options in R a year ago. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Pzena Investment Management, managed by Richard S. Pzena, holds the most valuable position in Ryder System, Inc. (NYSE:R). Pzena Investment Management has a $136.5 million position in the stock, comprising 0.7% of its 13F portfolio. The second most bullish fund manager is Jonathan Barrett and Paul Segal of Luminus Management, with a $132.3 million position; the fund has 3.2% of its 13F portfolio invested in the stock. Remaining professional money managers that hold long positions include Cliff Asness's AQR Capital Management, Ken Griffin's Citadel Investment Group and John Overdeck and David Siegel's Two Sigma Advisors.
Consequently, key hedge funds were leading the bulls' herd. Tudor Investment Corp, managed by Paul Tudor Jones, initiated the most valuable position in Ryder System, Inc. (NYSE:R). Tudor Investment Corp had $0.8 million invested in the company at the end of the quarter. David Andre and Astro Teller's Cerebellum Capital also made a $0.4 million investment in the stock during the quarter. The other funds with brand new R positions are Ben Levine, Andrew Manuel and Stefan Renold's LMR Partners, Bruce Kovner's Caxton Associates LP, and Matthew Hulsizer's PEAK6 Capital Management.
Let's now take a look at hedge fund activity in other stocks similar to Ryder System, Inc. (NYSE:R). These stocks are Coca-Cola Consolidated, Inc. (NASDAQ:COKE), The Medicines Company (NASDAQ:MDCO), Avista Corp (NYSE:AVA), and Simpson Manufacturing Co, Inc. (NYSE:SSD). This group of stocks' market caps are closest to R's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position COKE,11,26121,2 MDCO,33,921458,8 AVA,11,144066,-7 SSD,17,227787,-2 Average,18,329858,0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 18 hedge funds with bullish positions and the average amount invested in these stocks was $330 million. That figure was $353 million in R's case. The Medicines Company (NASDAQ:MDCO) is the most popular stock in this table. On the other hand Coca-Cola Consolidated, Inc. (NASDAQ:COKE) is the least popular one with only 11 bullish hedge fund positions. Ryder System, Inc. (NYSE:R) is not the most popular stock in this group but hedge fund interest is still above average. 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 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately R wasn't nearly as popular as these 20 stocks and hedge funds that were betting on R were disappointed as the stock returned -10.1% during the third quarter and underperformed 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 many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.