At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards RenaissanceRe Holdings Ltd. (NYSE:RNR).
RenaissanceRe Holdings Ltd. (NYSE:RNR) shareholders have witnessed an increase in support from the world's most elite money managers lately. RenaissanceRe Holdings Ltd. (NYSE:RNR) was in 41 hedge funds' portfolios at the end of the second quarter of 2020. The all time high for this statistics is 30. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that RNR 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.
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 101% since March 2017 and outperformed the S&P 500 ETFs by more than 56 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.
Chuck Royce of Royce & Associates
At Insider Monkey we scour multiple sources to uncover the next great investment idea. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than quadrupled this year. We are trying to identify other EV revolution winners, so we are checking out this under-the-radar lithium stock. We go through lists like the 10 most profitable companies in the world 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 to get excerpts of these letters in your inbox. Keeping this in mind we're going to take a glance at the new hedge fund action encompassing RenaissanceRe Holdings Ltd. (NYSE:RNR).
How have hedgies been trading RenaissanceRe Holdings Ltd. (NYSE:RNR)?
At the end of June, a total of 41 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 37% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards RNR over the last 20 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in RenaissanceRe Holdings Ltd. (NYSE:RNR) was held by Point72 Asset Management, which reported holding $148 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $138 million position. Other investors bullish on the company included Samlyn Capital, AQR Capital Management, and Polar Capital. In terms of the portfolio weights assigned to each position BlueMar Capital Management allocated the biggest weight to RenaissanceRe Holdings Ltd. (NYSE:RNR), around 7.89% of its 13F portfolio. Abrams Bison Investments is also relatively very bullish on the stock, designating 7.88 percent of its 13F equity portfolio to RNR.
With a general bullishness amongst the heavyweights, key hedge funds have jumped into RenaissanceRe Holdings Ltd. (NYSE:RNR) headfirst. Samlyn Capital, managed by Robert Pohly, established the biggest position in RenaissanceRe Holdings Ltd. (NYSE:RNR). Samlyn Capital had $81.3 million invested in the company at the end of the quarter. Louis Bacon's Moore Global Investments also made a $34.9 million investment in the stock during the quarter. The other funds with new positions in the stock are Chuck Royce's Royce & Associates, Ravi Chopra's Azora Capital, and Joe DiMenna's ZWEIG DIMENNA PARTNERS.
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 Clarivate Plc (NYSE:CCC), Charles River Laboratories International Inc. (NYSE:CRL), Natura &Co Holding S.A. (NYSE:NTCO), Brookfield Renewable Partners L.P. (NYSE:BEP), Elanco Animal Health Incorporated (NYSE:ELAN), James Hardie Industries plc (NYSE:JHX), and IPG Photonics Corporation (NASDAQ:IPGP). All of these stocks' market caps match RNR's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CCC,45,1300868,17 CRL,41,1050760,5 NTCO,5,85507,-3 BEP,5,30355,2 ELAN,30,212753,4 JHX,5,11376,1 IPGP,30,239086,10 Average,23,418672,5.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 23 hedge funds with bullish positions and the average amount invested in these stocks was $419 million. That figure was $871 million in RNR's case. Clarivate Plc (NYSE:CCC) is the most popular stock in this table. On the other hand Natura &Co Holding S.A. (NYSE:NTCO) is the least popular one with only 5 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. Our overall hedge fund sentiment score for RNR 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. 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 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 gained 30% in 2020 through October 23rd and beat the market by 21 percentage points. Unfortunately RNR wasn't nearly as popular as these 10 stocks and hedge funds that were betting on RNR were disappointed as the stock returned 4.4% since the end of June (through 10/23) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 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.