Will the new coronavirus cause a recession in US in the next 6 months? On February 27th, we put the probability at 75% and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards RealPage, Inc. (NASDAQ:RP).
RealPage, Inc. (NASDAQ:RP) shares haven’t seen a lot of action during the fourth quarter. Overall, hedge fund sentiment was unchanged. The stock was in 36 hedge funds’ portfolios at the end of December. At the end of this article we will also compare RP to other stocks including Manhattan Associates, Inc. (NASDAQ:MANH), World Wrestling Entertainment, Inc. (NYSE:WWE), and Eastgroup Properties Inc (NYSE:EGP) to get a better sense of its popularity.
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 has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Ricky Sandler of Eminence Capital
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. 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 regarding RealPage, Inc. (NASDAQ:RP).
How are hedge funds trading RealPage, Inc. (NASDAQ:RP)?
Heading into the first quarter of 2020, a total of 36 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards RP over the last 18 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Ricky Sandler’s Eminence Capital has the biggest position in RealPage, Inc. (NASDAQ:RP), worth close to $203.6 million, corresponding to 2.3% of its total 13F portfolio. Coming in second is Stockbridge Partners, led by Sharlyn C. Heslam, holding a $162.3 million position; the fund has 5.9% of its 13F portfolio invested in the stock. Other members of the smart money with similar optimism comprise Greg Poole’s Echo Street Capital Management, Israel Englander’s Millennium Management and D. E. Shaw’s D E Shaw. In terms of the portfolio weights assigned to each position Stockbridge Partners allocated the biggest weight to RealPage, Inc. (NASDAQ:RP), around 5.89% of its 13F portfolio. Potrero Capital Research is also relatively very bullish on the stock, designating 4.89 percent of its 13F equity portfolio to RP.
Judging by the fact that RealPage, Inc. (NASDAQ:RP) has experienced declining sentiment from hedge fund managers, it’s safe to say that there exists a select few fund managers who were dropping their positions entirely last quarter. Interestingly, James Parsons’s Junto Capital Management dropped the biggest position of the 750 funds tracked by Insider Monkey, totaling an estimated $43.2 million in stock. Steve Cohen’s fund, Point72 Asset Management, also dumped its stock, about $37.6 million worth. These transactions are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as RealPage, Inc. (NASDAQ:RP) but similarly valued. We will take a look at Manhattan Associates, Inc. (NASDAQ:MANH), World Wrestling Entertainment, Inc. (NYSE:WWE), Eastgroup Properties Inc (NYSE:EGP), and Tech Data Corp (NASDAQ:TECD). This group of stocks’ market values are closest to RP’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MANH | 24 | 455484 | -1 |
| WWE | 30 | 599403 | -7 |
| EGP | 10 | 64618 | -2 |
| TECD | 34 | 645025 | 11 |
| Average | 24.5 | 441133 | 0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.5 hedge funds with bullish positions and the average amount invested in these stocks was $441 million. That figure was $604 million in RP’s case. Tech Data Corp (NASDAQ:TECD) is the most popular stock in this table. On the other hand Eastgroup Properties Inc (NYSE:EGP) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks RealPage, Inc. (NASDAQ:RP) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but still managed to beat the market by 5.5 percentage points. Hedge funds were also right about betting on RP as the stock returned -3.1% so far in Q1 (through March 25th) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
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.
