U.S. markets open in 6 hours 54 minutes
  • S&P Futures

    3,850.75
    +16.50 (+0.43%)
     
  • Dow Futures

    31,003.00
    +94.00 (+0.30%)
     
  • Nasdaq Futures

    13,459.50
    +98.00 (+0.73%)
     
  • Russell 2000 Futures

    2,172.20
    +8.20 (+0.38%)
     
  • Crude Oil

    52.55
    +0.28 (+0.54%)
     
  • Gold

    1,850.10
    -6.10 (-0.33%)
     
  • Silver

    25.55
    -0.01 (-0.04%)
     
  • EUR/USD

    1.2183
    +0.0009 (+0.07%)
     
  • 10-Yr Bond

    1.0910
    0.0000 (0.00%)
     
  • Vix

    21.91
    +0.59 (+2.77%)
     
  • GBP/USD

    1.3711
    +0.0027 (+0.19%)
     
  • USD/JPY

    103.7060
    -0.0550 (-0.05%)
     
  • BTC-USD

    33,222.02
    -225.23 (-0.67%)
     
  • CMC Crypto 200

    674.09
    -2.81 (-0.41%)
     
  • FTSE 100

    6,695.07
    -20.35 (-0.30%)
     
  • Nikkei 225

    28,822.29
    +190.84 (+0.67%)
     

Were Hedge Funds Right About Loading Up On Raymond James Financial, Inc. (RJF)?

Abigail Fisher
·7 min read

In this article we are going to use hedge fund sentiment as a tool and determine whether Raymond James Financial, Inc. (NYSE:RJF) 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.

Raymond James Financial, Inc. (NYSE:RJF) has experienced an increase in enthusiasm from smart money in recent months. Raymond James Financial, Inc. (NYSE:RJF) was in 35 hedge funds' portfolios at the end of June. The all time high for this statistics is 35. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 31 hedge funds in our database with RJF holdings at the end of March. Our calculations also showed that RJF isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). Video: Watch our video about the top 5 most popular hedge fund stocks.

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 56 percentage points since March 2017 (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 stocks that are in our short portfolio.

Glenn Greenberg
Glenn Greenberg

Glenn Greenberg of Brave Warrior Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Last week, most investors overlooked a major development because of the presidential elections: Oregon became the first state to legalize psychedelic mushrooms which are shown to have promising results in treating depression, addiction, and PTSD in early stage academic studies. So, we are checking out this psychedelic drug stock idea right now. We go through lists like the 10 best high dividend stocks to buy to identify high dividend stocks with upside potential in this low interest rate environment. 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 to get excerpts of these letters in your inbox. Now let's go over the latest hedge fund action regarding Raymond James Financial, Inc. (NYSE:RJF).

What does smart money think about Raymond James Financial, Inc. (NYSE:RJF)?

At the end of June, a total of 35 of the hedge funds tracked by Insider Monkey were long this stock, a change of 13% from the previous quarter. By comparison, 35 hedge funds held shares or bullish call options in RJF a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Brave Warrior Capital was the largest shareholder of Raymond James Financial, Inc. (NYSE:RJF), with a stake worth $151.4 million reported as of the end of June. Trailing Brave Warrior Capital was Eminence Capital, which amassed a stake valued at $79.2 million. Fisher Asset Management, East Side Capital (RR Partners), and Fairpointe Capital 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 Brave Warrior Capital allocated the biggest weight to Raymond James Financial, Inc. (NYSE:RJF), around 7.53% of its 13F portfolio. East Side Capital (RR Partners) is also relatively very bullish on the stock, setting aside 6.41 percent of its 13F equity portfolio to RJF.

As aggregate interest increased, some big names were breaking ground themselves. Fairpointe Capital, managed by Thyra Zerhusen, assembled the most valuable position in Raymond James Financial, Inc. (NYSE:RJF). Fairpointe Capital had $14.4 million invested in the company at the end of the quarter. Dmitry Balyasny's Balyasny Asset Management also made a $6.8 million investment in the stock during the quarter. The other funds with brand new RJF positions are Donald Sussman's Paloma Partners, Michael Gelband's ExodusPoint Capital, and Parvinder Thiara's Athanor Capital.

Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Raymond James Financial, Inc. (NYSE:RJF) but similarly valued. We will take a look at Allegion plc (NYSE:ALLE), Quidel Corporation (NASDAQ:QDEL), CenterPoint Energy, Inc. (NYSE:CNP), Annaly Capital Management, Inc. (NYSE:NLY), PPD, Inc. (NASDAQ:PPD), Lamb Weston Holdings, Inc. (NYSE:LW), and Guidewire Software Inc (NYSE:GWRE). All of these stocks' market caps are closest to RJF's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ALLE,29,424856,-2 QDEL,32,282861,10 CNP,30,480314,-2 NLY,21,288668,-6 PPD,27,620340,0 LW,25,189982,-4 GWRE,29,1008560,-5 Average,27.6,470797,-1.3 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 27.6 hedge funds with bullish positions and the average amount invested in these stocks was $471 million. That figure was $436 million in RJF's case. Quidel Corporation (NASDAQ:QDEL) is the most popular stock in this table. On the other hand Annaly Capital Management, Inc. (NYSE:NLY) is the least popular one with only 21 bullish hedge fund positions. Compared to these stocks Raymond James Financial, Inc. (NYSE:RJF) is more popular among hedge funds. Our overall hedge fund sentiment score for RJF is 89. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks returned 23% in 2020 through October 30th but still managed to beat the market by 20.1 percentage points. Hedge funds were also right about betting on RJF as the stock returned 11.6% since the end of June (through 10/30) 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.

Get real-time email alerts: Follow Raymond James Financial Inc (NYSE:RJF)

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

Related Content