- Lori Calvasina of RBC Capital Markets says she's found a group of stocks that are losing support from hedge funds.
- Her list of "lead balloons" is made up of the small-company stocks where numerous hedge funds closed out their investments during the fourth quarter.
- RBC data shows that stocks that have lost a lot of support from those leading investors collectively underperform for years.
- Visit Business Insider's homepage for more stories.
Getting caught in traffic is as frustrating in investing as it is anywhere else.
Lori Calvasina, the head US equity strategist for RBC Capital Markets, may have identified a group of stocks where new investors are at risk of getting jammed as some of Wall Street's biggest investors head for the exits.
Calvasina and her team pored over data from 356 major hedge funds to find the stocks they most frequently exited during the fourth quarter. Based on their performance, she's collected the least-popular stocks into a list of "lead balloons"— because they're likely going down.
That uninspiring term reflects the fact that the stocks, as a group, are headed for trouble. Their fourth-quarter returns were notably weak: As a group, they underperformed the benchmark Russell 2000 index by 4.1%. It's gotten worse in 2020, as they're lagging by 6.4%.
Recent history says that might get worse over time: This chart by RBC shows that "lead balloons" generally fall further and further behind the market in the three years after hedge funds start to head for the exits.
With that dismal projection in mind, these are the 11 stocks that could be in the most trouble. They're ranked from lowest to highest based on the number of hedge funds that closed their positions in the stock during the fourth quarter.
SEE ALSO: MORGAN STANLEY: Buy these 25 non-Tesla stocks to cash in on the electric-car revolution
11. Stemline Therapeutics
Ticker: STML
Sector: Healthcare
Market cap: $349 million
Change in funds owning: -10
Source: RBC Capital Markets
10. Tanger Factory Outlet Centers
Ticker: SKT
Sector: Real estate
Market cap: $1.2 billion
Change in funds owning: -10
Source: RBC Capital Markets
9. Funko
Ticker: FNKO
Sector: Consumer discretionary
Market cap: $321 million
Change in funds owning: -10
Source: RBC Capital Markets
8. Adtalem Global Education
Ticker: ATGE
Sector: Consume discretionary
Market cap: $1.8 billion
Change in funds owning: -10
Source: RBC Capital Markets
7. Strategic Education
Ticker: STRA
Sector: Consumer discretionary
Market cap: $3.7 billion
Change in funds owning: -11
Source: RBC Capital Markets
6. SJW Group
Ticker: SJW
Sector: Utilities
Market cap: $2 billion
Change in funds owning: -11
Source: RBC Capital Markets
5. Quaker Chemical
Ticker: KWR
Sector: Materials
Market cap: $3.3 billion
Change in funds owning: -11
Source: RBC Capital Markets
4. Kennametal
Ticker: KMT
Sector: Industrials
Market cap: $2.5 billion
Change in funds owning: -11
Source: RBC Capital Markets
3. Uniti Group
Ticker: UNIT
Sector: Real estate
Market cap: $1.8 billion
Change in funds owning: -12
Source: RBC Capital Markets
2. Ping Identity Holdings
Ticker: PING
Sector: Information technology
Market cap: $2.2 billion
Change in funds owning: -14
Source: RBC Capital Markets
1. II-VI
Ticker: IIVI
Sector: Information technology
Market cap: $3.3 billion
Change in funds owning: -18
Source: RBC Capital Markets