In this article we will analyze whether Ryder System, Inc. (NYSE:R) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There's no better way to get these firms' immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market by double digits annually.
Is Ryder System, Inc. (NYSE:R) a healthy stock for your portfolio? Money managers were selling. The number of long hedge fund bets decreased by 1 recently. Ryder System, Inc. (NYSE:R) was in 19 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistic is 29. Our calculations also showed that R 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). There were 20 hedge funds in our database with R positions at the end of the second quarter.
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 66 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.
Donald Sussman Paloma Partners
Donald Sussman of Paloma Partners
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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 review the latest hedge fund action regarding Ryder System, Inc. (NYSE:R).
Do Hedge Funds Think R Is A Good Stock To Buy Now?
At Q3's end, a total of 19 of the hedge funds tracked by Insider Monkey were long this stock, a change of -5% from the previous quarter. By comparison, 22 hedge funds held shares or bullish call options in R a year ago. So, let's check 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, Pzena Investment Management, managed by Richard S. Pzena, holds the most valuable position in Ryder System, Inc. (NYSE:R). Pzena Investment Management has a $134.5 million position in the stock, comprising 0.8% of its 13F portfolio. On Pzena Investment Management's heels is Peter Rathjens, Bruce Clarke and John Campbell of Arrowstreet Capital, with a $43.8 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Some other peers that are bullish comprise Dmitry Balyasny's Balyasny Asset Management, John Overdeck and David Siegel's Two Sigma Advisors and Noam Gottesman's GLG Partners. In terms of the portfolio weights assigned to each position Pzena Investment Management allocated the biggest weight to Ryder System, Inc. (NYSE:R), around 0.84% of its 13F portfolio. Balyasny Asset Management is also relatively very bullish on the stock, earmarking 0.2 percent of its 13F equity portfolio to R.
Judging by the fact that Ryder System, Inc. (NYSE:R) has faced bearish sentiment from the entirety of the hedge funds we track, logic holds that there is a sect of hedgies who sold off their positions entirely in the third quarter. At the top of the heap, Jonathan Barrett and Paul Segal's Luminus Management sold off the largest position of the 750 funds watched by Insider Monkey, valued at an estimated $7.4 million in stock, and D. E. Shaw's D E Shaw was right behind this move, as the fund said goodbye to about $1.8 million worth. These bearish behaviors are interesting, as total hedge fund interest dropped by 1 funds in the third quarter.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Ryder System, Inc. (NYSE:R) but similarly valued. These stocks are CNO Financial Group Inc (NYSE:CNO), Primo Water Corporation (NYSE:PRMW), JELD-WEN Holding, Inc. (NYSE:JELD), MGE Energy, Inc. (NASDAQ:MGEE), Silk Road Medical, Inc. (NASDAQ:SILK), National Storage Affiliates Trust (NYSE:NSA), and IGM Biosciences, Inc. (NASDAQ:IGMS). All of these stocks' market caps match R's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CNO,19,293710,1 PRMW,26,638608,-5 JELD,24,209757,9 MGEE,6,65660,1 SILK,20,156999,0 NSA,19,123756,6 IGMS,16,691434,0 Average,18.6,311418,1.7 [/table]
As you can see these stocks had an average of 18.6 hedge funds with bullish positions and the average amount invested in these stocks was $311 million. That figure was $233 million in R's case. Primo Water Corporation (NYSE:PRMW) is the most popular stock in this table. On the other hand MGE Energy, Inc. (NASDAQ:MGEE) is the least popular one with only 6 bullish hedge fund positions. Ryder System, Inc. (NYSE:R) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for R is 56.2. 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 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 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. Hedge funds were also right about betting on R as the stock returned 45% since the end of Q3 (through 12/14) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.
