As investors cheered over the blue-chip Dow Jones Industrial Average index hitting above the symbolic 30,000 mark on Tuesday, it was the small-cap stocks that were soaring into the stratosphere.
The Russell 2000 index, which has risen 20% in November, hit an intraday record on Tuesday and is on track to close its best month ever in the index's history, according to CNBC.
The S&P SmallCap 600 is up 19% this month, outperforming the S&P 500 by 9%, and is also on pace to deliver the strongest one-month outperformance by the small-cap benchmark since December 2000, according to S&P Global.
For hedge funds that saw the big opportunities in small-cap stocks, the reward has been stunning. The 20 small-cap stocks that hedge funds plowed the most money into during the third quarter had outperformed the Russell 2000 by 80% on average this year as of November 18, RBC said in a Tuesday research note.
To pick out the biggest hedge fund bets, RBC analyzed the stock holdings of 330 funds based on their recently released 13F filings. Led by head of US equity strategy Lori Calvasina, the team screened for both large- and small-cap stocks that have been favored by these hedge funds.
While the large-cap stocks favored by hedge funds have been underperforming since late August due to the continued rotation into value and cyclical stocks, the hedge fund-favored small-cap stocks have consistently beaten the Russell 2000 pre-pandemic, during the recovery, and throughout bouts of market choppiness and underperformance in recent months, according to RBC.
More than half of the 20 stocks on the list are in the healthcare sector, RBC noted. One healthcare stock — Momenta Pharmaceuticals (MNTA) — was acquired by Johnson & Johnson in a $6.5 billion deal in October and therefore excluded from this list.
The rest of the 19 stocks are listed in order of total money value owned by hedge funds from the largest to smallest. The relative returns of these stocks year-to-date are as of market close on November 18.
1. SunRun
Ticker: RUN
Sector: Industrials
Market cap: $12.16 billion
Relative return YTD: 304.7%
Source: RBC
2. Mirati Therapeutics
Ticker: MRTX
Sector: Health care
Market cap: $11.43 billion
Relative return YTD: 68.9%
Source: RBC
3. Caesars Entertainment
Ticker: CZR
Sector: Consumer discretionary
Market cap: $13.36 billion
Relative return YTD: 0.9%
Source: RBC
4. MyoKardia
Ticker: MYOK
Sector: Health care
Market cap: $12.01 billion
Relative return YTD: 202.5%
Source: RBC
5. Wright Medical Group
Ticker: WMGI
Sector: Health care
Market cap: $3.81 billion
Relative return YTD: -7.7%
Source: RBC
6. BridgeBio Pharma
Ticker: BBIO
Sector: Health care
Market cap: $5.43 billion
Relative return YTD: 17.6%
Source: RBC
7. Navistar International
Ticker: NAV
Sector: Industrials
Market cap: $4.39 billion
Relative return YTD: 45.8%
Source: RBC
8. Amicus Therapeutics
Ticker: FOLD
Sector: Health Care
Market cap: $5.87 billion
Relative return YTD: 43.6%
Source: RBC
9. Acacia Communications
Ticker: ACIA
Sector: Info tech
Market cap: $2.93 billion
Relative return YTD: -4.3%
Source: RBC
10. Lithia Motors
Ticker: LAD
Sector: Consumer discretionary
Market cap: $7.48 billion
Relative return YTD: 80.4%
Source: RBC
11. Arena Pharmaceuticals
Ticker: ARNA
Sector: Health care
Market cap: $3.78 billion
Relative return YTD: 34.5%
Source: RBC
12. Nevro
Ticker: NVRO
Sector: Health care
Market cap: $5.91 billion
Relative return YTD: 40.3%
Source: RBC
13. CVR Energy
Ticker: CVI
Sector: Energy
Market cap: $1.39 billion
Relative return YTD: -71.8%
Source: RBC
14. Deckers Outdoor
Ticker: DECK
Sector: Consumer discretionary
Market cap: $6.95 billion
Relative return YTD: 43.1%
Source: RBC
15. Kodiak Sciences
Ticker: KOD
Sector: Health care
Market cap: $6.28 billion
Relative return YTD: 70.5%
Source: RBC
16. Blueprint Medicines
Ticker: BPMC
Sector: Health care
Market cap: $5.45 billion
Relative return YTD: 13.1%
Source: RBC
17. Advanced Disposal Services
Ticker: ADSW
Sector: Industrials
Market cap: $2.71 billion
Relative return YTD: -13.9%
Source: RBC
18. Fate Therapeutics
Ticker: FATE
Sector: Health Care
Market cap: $4.60 billion
Relative return YTD: 148.0%
Source: RBC
19. RH
Ticker: RH
Sector: Consumer discretionary
Market cap: $8.58 billion
Relative return YTD: 88.2%
Source: RBC