Is Radian Group Inc (NYSE:RDN) a good bet right now? We like to analyze hedge fund sentiment before doing days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy league graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Is Radian Group Inc (NYSE:RDN) a buy right now? Investors who are in the know are taking a bullish view. The number of bullish hedge fund bets went up by 4 lately. Our calculations also showed that RDN isn’t among the 30 most popular stocks among hedge funds. RDN was in 24 hedge funds’ portfolios at the end of the third quarter of 2018. There were 20 hedge funds in our database with RDN holdings at the end of the previous quarter.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 24% through December 3, 2018. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We’re going to view the recent hedge fund action regarding Radian Group Inc (NYSE:RDN).
Hedge fund activity in Radian Group Inc (NYSE:RDN)
At the end of the third quarter, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 20% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in RDN over the last 13 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, GLG Partners was the largest shareholder of Radian Group Inc (NYSE:RDN), with a stake worth $72.9 million reported as of the end of September. Trailing GLG Partners was Millennium Management, which amassed a stake valued at $27.2 million. Citadel Investment Group, Royce & Associates, and D E Shaw were also very fond of the stock, giving the stock large weights in their portfolios.
As one would reasonably expect, key money managers have jumped into Radian Group Inc (NYSE:RDN) headfirst. Brigade Capital, managed by Don Morgan, established the most outsized position in Radian Group Inc (NYSE:RDN). Brigade Capital had $8.5 million invested in the company at the end of the quarter. Roger Ibbotson’s Zebra Capital Management also initiated a $0.4 million position during the quarter. The following funds were also among the new RDN investors: Paul Marshall and Ian Wace’s Marshall Wace LLP and Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital.
Let’s check out hedge fund activity in other stocks similar to Radian Group Inc (NYSE:RDN). We will take a look at Thor Industries, Inc. (NYSE:THO), American Eagle Outfitters Inc. (NYSE:AEO), MKS Instruments, Inc. (NASDAQ:MKSI), and Rayonier Inc. (NYSE:RYN). This group of stocks’ market values are closest to RDN’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| THO | 28 | 377541 | -4 |
| AEO | 26 | 325532 | -5 |
| MKSI | 25 | 447755 | -3 |
| RYN | 17 | 303151 | 1 |
| Average | 24 | 363495 | -2.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 24 hedge funds with bullish positions and the average amount invested in these stocks was $363 million. That figure was $204 million in RDN’s case. Thor Industries, Inc. (NYSE:THO) is the most popular stock in this table. On the other hand Rayonier Inc. (NYSE:RYN) is the least popular one with only 17 bullish hedge fund positions. Radian Group Inc (NYSE:RDN) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard THO might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
