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Here’s What Hedge Funds Think About James River Group Holdings Ltd (JRVR)

Abigail Fisher

With the first-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the first quarter. One of these stocks was James River Group Holdings Ltd (NASDAQ:JRVR).

James River Group Holdings Ltd (NASDAQ:JRVR) investors should pay attention to an increase in hedge fund sentiment in recent months. Our calculations also showed that JRVR 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 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.

Chuck Royce

Let's take a look at the recent hedge fund action surrounding James River Group Holdings Ltd (NASDAQ:JRVR).

What have hedge funds been doing with James River Group Holdings Ltd (NASDAQ:JRVR)?

Heading into the second quarter of 2019, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 20% from the fourth quarter of 2018. Below, you can check out the change in hedge fund sentiment towards JRVR over the last 15 quarters. With hedgies' sentiment swirling, there exists an "upper tier" of noteworthy hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).

JRVR_june2019

Among these funds, Renaissance Technologies held the most valuable stake in James River Group Holdings Ltd (NASDAQ:JRVR), which was worth $22.3 million at the end of the first quarter. On the second spot was Royce & Associates which amassed $7.8 million worth of shares. Moreover, Citadel Investment Group, Interval Partners, and Marshall Wace LLP were also bullish on James River Group Holdings Ltd (NASDAQ:JRVR), allocating a large percentage of their portfolios to this stock.

Consequently, key money managers were leading the bulls' herd. Winton Capital Management, managed by David Harding, created the most outsized position in James River Group Holdings Ltd (NASDAQ:JRVR). Winton Capital Management had $0.6 million invested in the company at the end of the quarter. Noam Gottesman's GLG Partners also made a $0.4 million investment in the stock during the quarter. The only other fund with a new position in the stock is Andrew Feldstein and Stephen Siderow's Blue Mountain Capital.

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as James River Group Holdings Ltd (NASDAQ:JRVR) but similarly valued. These stocks are COMSCORE, Inc. (NASDAQ:SCOR), WillScot Corporation (NASDAQ:WSC), Editas Medicine, Inc. (NASDAQ:EDIT), and FormFactor, Inc. (NASDAQ:FORM). This group of stocks' market caps are similar to JRVR's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SCOR,14,270009,2 WSC,22,131621,-2 EDIT,15,107651,-3 FORM,11,51910,1 Average,15.5,140298,-0.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 15.5 hedge funds with bullish positions and the average amount invested in these stocks was $140 million. That figure was $38 million in JRVR's case. WillScot Corporation (NASDAQ:WSC) is the most popular stock in this table. On the other hand FormFactor, Inc. (NASDAQ:FORM) is the least popular one with only 11 bullish hedge fund positions. James River Group Holdings Ltd (NASDAQ:JRVR) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. A small number of hedge funds were also right about betting on JRVR as the stock returned 18.4% during the same time frame and outperformed the market by an even larger margin.

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

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