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Is Revlon Inc (REV) A Good Stock To Buy?

Nina Todic

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.

Is Revlon Inc (NYSE:REV) a buy, sell, or hold? The best stock pickers are betting on the stock. The number of long hedge fund bets went up by 2 recently. Our calculations also showed that rev isn't among the 30 most popular stocks among hedge funds. REV was in 28 hedge funds' portfolios at the end of March. There were 26 hedge funds in our database with REV holdings at the end of the previous quarter.

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.

Kamran Moghtaderi Eversept Partners

Let's take a glance at the key hedge fund action surrounding Revlon Inc (NYSE:REV).

What does the smart money think about Revlon Inc (NYSE:REV)?

At the end of the first quarter, a total of 28 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 8% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards REV over the last 15 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with REV Positions

Among these funds, Pzena Investment Management held the most valuable stake in Revlon Inc (NYSE:REV), which was worth $43 million at the end of the first quarter. On the second spot was SCW Capital Management which amassed $35.2 million worth of shares. Moreover, Eversept Partners, Litespeed Management, and Renaissance Technologies were also bullish on Revlon Inc (NYSE:REV), allocating a large percentage of their portfolios to this stock.

With a general bullishness amongst the heavyweights, some big names have been driving this bullishness. Litespeed Management, managed by Jamie Zimmerman, created the largest position in Revlon Inc (NYSE:REV). Litespeed Management had $25.5 million invested in the company at the end of the quarter. Michael M. Rothenberg's Moab Capital Partners also initiated a $8.1 million position during the quarter. The following funds were also among the new REV investors: Thomas Bailard's Bailard Inc, Paul Tudor Jones's Tudor Investment Corp, and Guy Shahar's DSAM Partners.

Let's also examine hedge fund activity in other stocks similar to Revlon Inc (NYSE:REV). We will take a look at Boingo Wireless Inc (NASDAQ:WIFI), Apogee Enterprises, Inc. (NASDAQ:APOG), OFG Bancorp (NYSE:OFG), and Victory Capital Holdings, Inc. (NASDAQ:VCTR). All of these stocks' market caps resemble REV's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WIFI,17,136649,-1 APOG,11,144883,-5 OFG,20,74193,3 VCTR,13,61732,3 Average,15.25,104364,0 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 15.25 hedge funds with bullish positions and the average amount invested in these stocks was $104 million. That figure was $268 million in REV's case. OFG Bancorp (NYSE:OFG) is the most popular stock in this table. On the other hand Apogee Enterprises, Inc. (NASDAQ:APOG) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Revlon Inc (NYSE:REV) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Hedge funds were also right about betting on REV as the stock returned 12.4% during the same period and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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

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