We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the fourth quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4 years and analyze what the smart money thinks of Redfin Corporation (NASDAQ:RDFN) based on that data.
Redfin Corporation (NASDAQ:RDFN) was in 15 hedge funds’ portfolios at the end of the fourth quarter of 2019. RDFN investors should be aware of a decrease in hedge fund interest recently. There were 16 hedge funds in our database with RDFN positions at the end of the previous quarter. Our calculations also showed that RDFN isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 41 percentage points since March 2017 (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 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Steven Cohen of Point72 Asset Management
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s take a gander at the latest hedge fund action encompassing Redfin Corporation (NASDAQ:RDFN).
What does smart money think about Redfin Corporation (NASDAQ:RDFN)?
At the end of the fourth quarter, a total of 15 of the hedge funds tracked by Insider Monkey were long this stock, a change of -6% from the third quarter of 2019. On the other hand, there were a total of 7 hedge funds with a bullish position in RDFN a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Redfin Corporation (NASDAQ:RDFN) was held by Ancient Art (Teton Capital), which reported holding $56.1 million worth of stock at the end of September. It was followed by Atreides Management with a $22.9 million position. Other investors bullish on the company included Intrinsic Edge Capital, Point72 Asset Management, and Balyasny Asset Management. In terms of the portfolio weights assigned to each position Ancient Art (Teton Capital) allocated the biggest weight to Redfin Corporation (NASDAQ:RDFN), around 8.34% of its 13F portfolio. Atreides Management is also relatively very bullish on the stock, dishing out 5.24 percent of its 13F equity portfolio to RDFN.
Due to the fact that Redfin Corporation (NASDAQ:RDFN) has experienced a decline in interest from the aggregate hedge fund industry, we can see that there exists a select few fund managers that slashed their full holdings last quarter. Intriguingly, Michael Sidhom’s Immersion Capital sold off the largest position of all the hedgies watched by Insider Monkey, comprising close to $81 million in stock, and Richard Driehaus’s Driehaus Capital was right behind this move, as the fund dumped about $4.7 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest fell by 1 funds last quarter.
Let’s check out hedge fund activity in other stocks similar to Redfin Corporation (NASDAQ:RDFN). These stocks are Momenta Pharmaceuticals, Inc. (NASDAQ:MNTA), ProAssurance Corporation (NYSE:PRA), Four Corners Property Trust, Inc. (NYSE:FCPT), and Coeur d’Alene Mines Corporation (NYSE:CDE). This group of stocks’ market valuations are similar to RDFN’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MNTA | 33 | 553006 | 15 |
| PRA | 18 | 189428 | 3 |
| FCPT | 15 | 91164 | -3 |
| CDE | 15 | 73570 | 0 |
| Average | 20.25 | 226792 | 3.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.25 hedge funds with bullish positions and the average amount invested in these stocks was $227 million. That figure was $140 million in RDFN’s case. Momenta Pharmaceuticals, Inc. (NASDAQ:MNTA) is the most popular stock in this table. On the other hand Four Corners Property Trust, Inc. (NYSE:FCPT) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks Redfin Corporation (NASDAQ:RDFN) is even less popular than FCPT. Hedge funds dodged a bullet by taking a bearish stance towards RDFN. Our calculations showed that the top 20 most popular hedge fund stocks returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 13.0% in 2020 through April 6th but managed to beat the market by 4.2 percentage points. Unfortunately RDFN wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); RDFN investors were disappointed as the stock returned -22.9% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in 2020.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
