Do Hedge Funds Love RPX Corp (RPXC)?

At Insider Monkey we track the activity of some of the best-performing hedge funds like Appaloosa Management, Baupost, and Third Point because we determined that some of the stocks that they are collectively bullish on can help us generate returns above the broader indices. Out of thousands of stocks that hedge funds invest in, small-caps can provide the best returns over the long term due to the fact that these companies are less efficiently priced and are usually under the radars of mass-media, analysts and dumb money. This is why we follow the smart money moves in the small-cap space.

RPX Corp (NASDAQ:RPXC) investors should be aware of a decrease in enthusiasm from smart money lately. RPXC was in 14 hedge funds’ portfolios at the end of September. There were 17 hedge funds in our database with RPXC holdings at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Unifi, Inc. (NYSE:UFI), AtriCure Inc. (NASDAQ:ATRC), and Armstrong Flooring Inc (NYSE:AFI) to gather more data points.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

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Now, let’s analyze the fresh action encompassing RPX Corp (NASDAQ:RPXC).

What have hedge funds been doing with RPX Corp (NASDAQ:RPXC)?

At the end of the third quarter, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, a drop of 18% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in RPXC over the last 5 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Nathaniel August’s Mangrove Partners has the biggest position in RPX Corp (NASDAQ:RPXC), worth close to $38.4 million, amounting to 9% of its total 13F portfolio. Coming in second is Jim Simons’ Renaissance Technologies, holding a $25.4 million position. Other professional money managers that are bullish consist of D. E. Shaw’s D E Shaw, Ari Zweiman’s 683 Capital Partners and Cliff Asness’ AQR Capital Management. We should note that two of these hedge funds (Mangrove Partners and 683 Capital Partners) are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

We already know that not all hedge funds are bullish on the stock and some hedge funds actually dropped their positions entirely. At the top of the heap, Joshua Packwood and Schuster Tanger’s Radix Partners dropped the biggest investment of all the investors studied by Insider Monkey, totaling close to $0.4 million in stock, and Joel Greenblatt’s Gotham Asset Management was right behind this move, as the fund sold off about $0.3 million worth of shares.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as RPX Corp (NASDAQ:RPXC) but similarly valued. We will take a look at Unifi, Inc. (NYSE:UFI), AtriCure Inc. (NASDAQ:ATRC), Armstrong Flooring Inc (NYSE:AFI), and World Point Terminals LP (NYSE:WPT). This group of stocks’ market valuations are closest to RPXC’s market valuation.

As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $87 million. That figure was $105 million in RPXC’s case. AtriCure Inc. (NASDAQ:ATRC) is the most popular stock in this table. On the other hand World Point Terminals LP (NYSE:WPT) is the least popular one with only 3 bullish hedge fund positions. RPX Corp (NASDAQ:RPXC) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard ATRC might be a better candidate to consider taking a long position in.

Disclosure: None