Hedge Funds Are Buying RealPage, Inc. (RP)

The elite funds run by legendary investors such as Dan Loeb and David Tepper make hundreds of millions of dollars for themselves and their investors by spending enormous resources doing research on small cap stocks that big investment banks don’t follow. Because of their pay structures, they have strong incentive to do the research necessary to beat the market. That’s why we pay close attention to what they think in small cap stocks. In this article, we take a closer look at RealPage, Inc. (NASDAQ:RP) from the perspective of those elite funds.

RealPage, Inc. (NASDAQ:RP) was in 26 hedge funds’ portfolios at the end of September. RP has experienced an increase in enthusiasm from smart money recently. There were 19 hedge funds in our database with RP holdings at the end of the previous quarter. At the end of this article we will also compare RP to other stocks including Wright Medical Group Inc (NASDAQ:WMGI), Exelixis, Inc. (NASDAQ:EXEL), and Northwest Natural Gas Co (NYSE:NWN) to get a better sense of its popularity.

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.

Alexander Raths/Shutterstock.com

Now, let’s review the recent action encompassing RealPage, Inc. (NASDAQ:RP).

What does the smart money think about RealPage, Inc. (NASDAQ:RP)?

At the end of the third quarter, a total of 26 of the hedge funds tracked by Insider Monkey were long this stock, a boost of 37% from one quarter earlier. With hedge funds’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were upping their stakes significantly (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Sharlyn C. Heslam’s Stockbridge Partners has the biggest position in RealPage, Inc. (NASDAQ:RP), worth close to $96.8 million, accounting for 4.7% of its total 13F portfolio. The second largest stake is held by Robert Joseph Caruso of Select Equity Group, with a $32.2 million position; 0.3% of its 13F portfolio is allocated to the company. Remaining peers that hold long positions consist of Thomas Ellis and Todd Hammer’s North Run Capital, Spencer M. Waxman’s Shannon River Fund Management and Jim Simons’s Renaissance Technologies.

With a general bullishness amongst the heavyweights, key money managers have been driving this bullishness. Shannon River Fund Management, managed by Spencer M. Waxman, assembled the biggest position in RealPage, Inc. (NASDAQ:RP). According to regulatory filings, the fund had $18.6 million invested in the company at the end of the quarter. Sheetal Duggal’s Thrax Management also made a $2.9 million investment in the stock during the quarter. The other funds with new positions in the stock are Steve Cohen’s Point72 Asset Management, Paul Marshall and Ian Wace’s Marshall Wace LLP, and Adam Wright and Gary Kohler’s Blue Clay Capital.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as RealPage, Inc. (NASDAQ:RP) but similarly valued. These stocks are Wright Medical Group Inc (NASDAQ:WMGI), Exelixis, Inc. (NASDAQ:EXEL), Northwest Natural Gas Co (NYSE:NWN), and Greif, Inc. (NYSE:GEF). This group of stocks’ market values are similar to RP’s market value.

As you can see these stocks had an average of 25 hedge funds with bullish positions and the average amount invested in these stocks was $350 million. That figure was $257 million in RP’s case. Exelixis, Inc. (NASDAQ:EXEL) is the most popular stock in this table. On the other hand Northwest Natural Gas Co (NYSE:NWN) is the least popular one with only 12 bullish hedge fund positions. RealPage, Inc. (NASDAQ:RP) 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 EXEL might be a better candidate to consider a long position.

Disclosure: none.