Mark Cuban, the famous investor and television personality, is still dedicated to his investment in Reading International, Inc. (NASDAQ:RDIB). In a recent filing with the Securities and Exchange Commission, Cuban has reiterated his stake in the company: 207,611 Class B shares or 13.1% of the total Class B voting common stock. According to the same filing, Mr. Cuban also holds 72,164 class A nonvoting shares.
First a quick word on why we track hedge fund activity. In 2014, equity hedge funds returned just 1.4%. In 2013, that figure was 11.3%, and in 2012, they returned just 4.8%. These are embarrassingly low figures compared to the S&P 500 ETF (SPY)’s 13.5% gain in 2014, 32.3% gain in 2013, and 16% gain in 2012. Does this mean that hedge fund managers are dumber than a bucket of rocks when it comes to picking stocks? The answer is definitely no. Our small-cap hedge fund strategy, which identifies the best small-cap stock picks of the best hedge fund managers returned 28.2% in 2014, 53.2% in 2013, and 33.3% in 2012, outperforming the market each year (it’s outperforming it so far in 2015 too). What’s the reason for this discrepancy you may ask? The reason is simple: size. Hedge funds have gotten so large, they have to allocate the majority of their money into large-cap liquid stocks that are more efficiently priced. They are like mutual funds now. Consider Ray Dalio’s Bridgewater Associates, the largest in the industry with about $165 billion in AUM. It can’t allocate too much money into a small-cap stock as merely obtaining 2% exposure would really move the price. In fact, Dalio can’t even obtain 2% exposure to many small-cap stocks, even if he essentially owned the entire company, as they’re simply too small (or rather, his fund is too big). This is where we come in. Our research has shown that it is actually hedge funds’ small-cap picks that are their best performing ones and we have consistently identified the best picks of the best managers, returning 123% since the launch of our small-cap strategy compared to less than 70% for the S&P 500 ETF (SPY) (see more details).
A host of top hedge funds we track are also invested in Reading International, Inc. (NASDAQ:RDI), with Jim Simons‘ Renaissance Technologies holding the largest position: 629,100 shares, up by 24% during the first quarter of 2015. Whitney Tilson, the manager of T2 Partners, is also bullish on the stock, owning 371,106 shares as of the end of June.
The company is currently undergoing a change in management and is searching for a new Chief Executive Office (CEO). On June 15, Reading International’s Board of Directors has announced the appointment of Ellen M. Cotter as interim President and CEO, who had previously served as the senior operating officer of domestic operations. The company’s previous CEO, James J. Cotter, Sr., passed away in October 2014.
For the three months of 2015, Reading International, Inc. (NASDAQ:RDI) posted revenues of $60.6 million and earnings per share of $0.13, a significant decline from the $0.73 per share reported for the previous quarter. The stock is currently trading at a Price to Earnings (P/E) multiple of 9.xx, which is significantly lower than the industry average of 92.20. By mid-July, the stock had been in a positive trend and reaching a high of $14.22 before taking a battering in the last two weeks of July.
At the end of May, Mark Cuban has disclosed the liquidation of his stake in Rentrak Corporation (NASDAQ:RENT), a provider of consumer viewing and purchasing patterns for media and television companies. Cuban had sold 772,900 shares to a private party at $62.75 per unit. He holds 1.13 million shares of Vringo, Inc. (NASDAQ:VRNG), which account for 1.4% of the company’s common stock. Mark Cuban also owns several film distributors and providers of entertainment facilities through 2929 Entertainment, a media group which he co-founded. The group manages companies such as Magnolia Pictures and Landmark Theaters, entities Cuban had put up for sale back in 2011.
In 2008, the Securities and Exchange Commission filed a suit against Cuban for alleged insider trading with the shares of Mamma.com, now Copernic. Cuban pleaded not guilty and was acquitted in 2013 by a Texas Jury. He is also a critique of High Frequency Trading, which has sparked intense debate in the past couple of years.
Disclosure: none.