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At Insider Monkey, we pore over the filings of nearly 817 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we've gathered as a result gives us access to a wealth of collective knowledge based on these firms' portfolio holdings as of September 30. In this article, we will use that wealth of knowledge to determine whether or not Republic Services, Inc. (NYSE:RSG) makes for a good investment right now.
Is RSG a good stock to buy? Hedge fund interest in Republic Services, Inc. (NYSE:RSG) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that RSG isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). At the end of this article we will also compare RSG to other stocks including Cadence Design Systems Inc (NASDAQ:CDNS), Brown-Forman Corporation (NYSE:BF), and PACCAR Inc (NASDAQ:PCAR) to get a better sense of its popularity.
Video: Watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Aaron Cowen of Suvretta Capital Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy to pick the best large-cap stocks to buy. 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. Keeping this in mind we're going to take a peek at the latest hedge fund action surrounding Republic Services, Inc. (NYSE:RSG).
Do Hedge Funds Think RSG Is A Good Stock To Buy Now?
At Q3's end, a total of 37 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. On the other hand, there were a total of 35 hedge funds with a bullish position in RSG a year ago. With the smart money's sentiment swirling, there exists a select group of key hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).
More specifically, AQR Capital Management was the largest shareholder of Republic Services, Inc. (NYSE:RSG), with a stake worth $143.7 million reported as of the end of September. Trailing AQR Capital Management was Chilton Investment Company, which amassed a stake valued at $123.1 million. GAMCO Investors, Two Sigma Advisors, and Renaissance Technologies were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Chilton Investment Company allocated the biggest weight to Republic Services, Inc. (NYSE:RSG), around 3.62% of its 13F portfolio. Wallace Capital Management is also relatively very bullish on the stock, setting aside 1.92 percent of its 13F equity portfolio to RSG.
Seeing as Republic Services, Inc. (NYSE:RSG) has faced a decline in interest from the smart money, logic holds that there was a specific group of money managers who sold off their full holdings heading into Q4. Interestingly, Paul Marshall and Ian Wace's Marshall Wace LLP dropped the largest stake of the "upper crust" of funds followed by Insider Monkey, comprising about $5.6 million in stock. Paul Tudor Jones's fund, Tudor Investment Corp, also sold off its stock, about $3.3 million worth. These transactions are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's check out hedge fund activity in other stocks similar to Republic Services, Inc. (NYSE:RSG). We will take a look at Cadence Design Systems Inc (NASDAQ:CDNS), Brown-Forman Corporation (NYSE:BF), PACCAR Inc (NASDAQ:PCAR), The Allstate Corporation (NYSE:ALL), T. Rowe Price Group, Inc. (NASDAQ:TROW), Trane Technologies plc (NYSE:TT), and PPG Industries, Inc. (NYSE:PPG). All of these stocks' market caps are similar to RSG's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CDNS,37,1208067,-2 BF,32,672078,4 PCAR,34,442104,4 ALL,38,1246660,-8 TROW,34,348235,0 TT,37,831744,-3 PPG,36,230601,0 Average,35.4,711356,-0.7 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 35.4 hedge funds with bullish positions and the average amount invested in these stocks was $711 million. That figure was $870 million in RSG's case. The Allstate Corporation (NYSE:ALL) is the most popular stock in this table. On the other hand Brown-Forman Corporation (NYSE:BF) is the least popular one with only 32 bullish hedge fund positions. Republic Services, Inc. (NYSE:RSG) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for RSG is 76.7. 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. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 33.3% in 2020 through December 18th and beat the market again by 16.4 percentage points. Unfortunately RSG wasn't nearly as popular as these 20 stocks and hedge funds that were betting on RSG were disappointed as the stock returned 3.7% since the end of September (through 12/18) 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 many of these stocks already outperformed the market so far this year.
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Disclosure: None. This article was originally published at Insider Monkey.