At Insider Monkey we follow nearly 750 of the best-performing investors and even though many of them lost money in the last couple of months of 2018 (some actually delivered very strong returns), the history teaches us that over the long-run they still manage to beat the market, which is why it can be profitable for us to imitate their activity. Of course, even the best money managers can sometimes get it wrong, but following some of their picks gives us a better chance to outperform the crowd than picking a random stock and this is where our research comes in.
RenaissanceRe Holdings Ltd. (NYSE:RNR) investors should be aware of an increase in activity from the world's largest hedge funds recently. RNR was in 22 hedge funds' portfolios at the end of December. There were 20 hedge funds in our database with RNR holdings at the end of the previous quarter. Our calculations also showed that RNR 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 32 percentage points since May 2014 through March 12, 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.
Let's take a peek at the new hedge fund action encompassing RenaissanceRe Holdings Ltd. (NYSE:RNR).
Hedge fund activity in RenaissanceRe Holdings Ltd. (NYSE:RNR)
At the end of the fourth quarter, a total of 22 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 10% from one quarter earlier. By comparison, 16 hedge funds held shares or bullish call options in RNR a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Renaissance Technologies held the most valuable stake in RenaissanceRe Holdings Ltd. (NYSE:RNR), which was worth $177.1 million at the end of the third quarter. On the second spot was Abrams Bison Investments which amassed $83.7 million worth of shares. Moreover, Polar Capital, Diamond Hill Capital, and AQR Capital Management were also bullish on RenaissanceRe Holdings Ltd. (NYSE:RNR), allocating a large percentage of their portfolios to this stock.
Consequently, some big names have been driving this bullishness. Lomas Capital Management, managed by Daniel Lascano, initiated the biggest position in RenaissanceRe Holdings Ltd. (NYSE:RNR). Lomas Capital Management had $6.5 million invested in the company at the end of the quarter. Sander Gerber's Hudson Bay Capital Management also made a $3.4 million investment in the stock during the quarter. The other funds with brand new RNR positions are John Overdeck and David Siegel's Two Sigma Advisors, Matthew Hulsizer's PEAK6 Capital Management, and Michael Platt and William Reeves's BlueCrest Capital Mgmt..
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as RenaissanceRe Holdings Ltd. (NYSE:RNR) but similarly valued. These stocks are Fortune Brands Home & Security Inc (NYSE:FBHS), CubeSmart (NYSE:CUBE), Carlyle Group LP (NASDAQ:CG), and BOK Financial Corporation (NASDAQ:BOKF). This group of stocks' market valuations resemble RNR's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FBHS,31,418666,-2 CUBE,22,440463,2 CG,10,112818,0 BOKF,19,219708,3 Average,20.5,297914,0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.5 hedge funds with bullish positions and the average amount invested in these stocks was $298 million. That figure was $489 million in RNR's case. Fortune Brands Home & Security Inc (NYSE:FBHS) is the most popular stock in this table. On the other hand Carlyle Group LP (NASDAQ:CG) is the least popular one with only 10 bullish hedge fund positions. RenaissanceRe Holdings Ltd. (NYSE:RNR) 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 15 most popular stocks among hedge funds returned 21.3% through April 8th and outperformed the S&P 500 ETF (SPY) by more than 5 percentage points. Unfortunately RNR wasn't in this group. Hedge funds that bet on RNR were disappointed as the stock returned 7.9% and underperformed the market. If you are interested in investing in large cap stocks, you should check out the top 15 hedge fund stocks as 12 of these outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.