- Oops!Something went wrong.Please try again later.
- Oops!Something went wrong.Please try again later.
In this article we are going to use hedge fund sentiment as a tool and determine whether Regal Beloit Corporation (NYSE:RBC) is a good investment 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.
Is RBC stock a buy? Regal Beloit Corporation (NYSE:RBC) shares haven't seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 25 hedge funds' portfolios at the end of the fourth quarter of 2020. Our calculations also showed that RBC isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings). The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as Medpace Holdings, Inc. (NASDAQ:MEDP), Cousins Properties Incorporated (NYSE:CUZ), and Grupo Aeroportuario del Sureste, S. A. B. de C. V. (NYSE:ASR) to gather more data points.
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 S&P 500 ETFs by more than 124 percentage points since March 2017 (see the details here).
Richard Driehaus of Driehaus Capital
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the CBD market is growing at a 33% annualized rate, so we are taking a closer look at this under-the-radar hemp stock. We go through lists like the 10 best biotech stocks under $10 to identify the next stock with 10x upside potential. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. With all of this in mind we're going to take a peek at the new hedge fund action regarding Regal Beloit Corporation (NYSE:RBC).
Do Hedge Funds Think RBC Is A Good Stock To Buy Now?
At Q4's end, a total of 25 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the third quarter of 2020. On the other hand, there were a total of 24 hedge funds with a bullish position in RBC a year ago. So, let's find out 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, Ken Fisher's Fisher Asset Management has the most valuable position in Regal Beloit Corporation (NYSE:RBC), worth close to $70.7 million, accounting for 0.1% of its total 13F portfolio. On Fisher Asset Management's heels is AQR Capital Management, managed by Cliff Asness, which holds a $55 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Some other peers that hold long positions encompass Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital, Ken Griffin's Citadel Investment Group and Alexander Mitchell's Scopus Asset Management. In terms of the portfolio weights assigned to each position Brant Point Investment Management allocated the biggest weight to Regal Beloit Corporation (NYSE:RBC), around 1.08% of its 13F portfolio. Prospector Partners is also relatively very bullish on the stock, designating 0.85 percent of its 13F equity portfolio to RBC.
Since Regal Beloit Corporation (NYSE:RBC) has witnessed bearish sentiment from the smart money, we can see that there were a few fund managers that decided to sell off their full holdings last quarter. At the top of the heap, Donald Sussman's Paloma Partners dumped the biggest investment of all the hedgies monitored by Insider Monkey, comprising about $1.3 million in stock. Parvinder Thiara's fund, Athanor Capital, also cut its stock, about $0.6 million worth. These transactions are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Regal Beloit Corporation (NYSE:RBC) but similarly valued. We will take a look at Medpace Holdings, Inc. (NASDAQ:MEDP), Cousins Properties Incorporated (NYSE:CUZ), Grupo Aeroportuario del Sureste, S. A. B. de C. V. (NYSE:ASR), The Descartes Systems Group Inc (NASDAQ:DSGX), TFS Financial Corporation (NASDAQ:TFSL), Owl Rock Capital Corporation (NYSE:ORCC), and Mercury Systems Inc (NASDAQ:MRCY). All of these stocks' market caps are similar to RBC's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MEDP,25,248031,-6 CUZ,16,52738,3 ASR,10,63126,0 DSGX,12,248616,0 TFSL,10,136574,1 ORCC,20,277015,5 MRCY,10,50331,-9 Average,14.7,153776,-0.9 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.7 hedge funds with bullish positions and the average amount invested in these stocks was $154 million. That figure was $308 million in RBC's case. Medpace Holdings, Inc. (NASDAQ:MEDP) is the most popular stock in this table. On the other hand Grupo Aeroportuario del Sureste, S. A. B. de C. V. (NYSE:ASR) is the least popular one with only 10 bullish hedge fund positions. Regal Beloit Corporation (NYSE:RBC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for RBC is 85. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.3% in 2021 through April 19th and still beat the market by 0.9 percentage points. Hedge funds were also right about betting on RBC as the stock returned 17.5% since the end of Q4 (through 4/19) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Get real-time email alerts: Follow Regal Beloit Corp (NYSE:RBC)
Disclosure: None. This article was originally published at Insider Monkey.