Is Robert Half International Inc. (NYSE:RHI) a good bet right now? We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds' picks don't beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Robert Half International Inc. (NYSE:RHI) was in 21 hedge funds' portfolios at the end of the third quarter of 2019. RHI shareholders have witnessed a decrease in hedge fund sentiment lately. There were 26 hedge funds in our database with RHI positions at the end of the previous quarter. Our calculations also showed that RHI isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_745225" align="aligncenter" width="473"] Noam Gottesman of GLG Partners[/caption]
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. Let's take a glance at the fresh hedge fund action surrounding Robert Half International Inc. (NYSE:RHI).
How are hedge funds trading Robert Half International Inc. (NYSE:RHI)?
At the end of the third quarter, a total of 21 of the hedge funds tracked by Insider Monkey were long this stock, a change of -19% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in RHI over the last 17 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Robert Half International Inc. (NYSE:RHI) was held by AQR Capital Management, which reported holding $320.9 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $70.4 million position. Other investors bullish on the company included Millennium Management, GLG Partners, and Renaissance Technologies. In terms of the portfolio weights assigned to each position Neo Ivy Capital allocated the biggest weight to Robert Half International Inc. (NYSE:RHI), around 0.55% of its 13F portfolio. AQR Capital Management is also relatively very bullish on the stock, setting aside 0.38 percent of its 13F equity portfolio to RHI.
Seeing as Robert Half International Inc. (NYSE:RHI) has witnessed a decline in interest from hedge fund managers, it's easy to see that there exists a select few hedgies who sold off their full holdings by the end of the third quarter. At the top of the heap, Ken Grossman and Glen Schneider's SG Capital Management dropped the largest investment of all the hedgies monitored by Insider Monkey, totaling an estimated $10.4 million in stock, and Peter Muller's PDT Partners was right behind this move, as the fund dropped about $7.3 million worth. These transactions are intriguing to say the least, as total hedge fund interest fell by 5 funds by the end of the third quarter.
Let's go over hedge fund activity in other stocks similar to Robert Half International Inc. (NYSE:RHI). We will take a look at Steel Dynamics, Inc. (NASDAQ:STLD), PVH Corp (NYSE:PVH), Signature Bank (NASDAQ:SBNY), and New Residential Investment Corp (NYSE:NRZ). This group of stocks' market values are closest to RHI's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position STLD,25,515633,-6 PVH,27,1027637,-5 SBNY,32,502279,3 NRZ,19,141891,3 Average,25.75,546860,-1.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 25.75 hedge funds with bullish positions and the average amount invested in these stocks was $547 million. That figure was $577 million in RHI's case. Signature Bank (NASDAQ:SBNY) is the most popular stock in this table. On the other hand New Residential Investment Corp (NYSE:NRZ) is the least popular one with only 19 bullish hedge fund positions. Robert Half International Inc. (NYSE:RHI) 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately RHI wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); RHI investors were disappointed as the stock returned 5.1% during the first two months of the fourth 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 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.