We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. That’s a big deal.This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.
RumbleOn, Inc. (NASDAQ:RMBL) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 6 hedge funds’ portfolios at the end of the third quarter of 2019. 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 Global Eagle Acquisition Corp (NASDAQ:ENT), Volt Information Sciences, Inc. (NYSE:VOLT), and Mastech Holdings, Inc. (NYSE:MHH) to gather more data points. Our calculations also showed that RMBL isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
To most traders, hedge funds are seen as slow, outdated investment tools of the past. While there are over 8000 funds trading at the moment, We choose to focus on the masters of this group, about 750 funds. These money managers direct bulk of the hedge fund industry’s total asset base, and by monitoring their highest performing picks, Insider Monkey has deciphered many investment strategies that have historically outperformed the market. Insider Monkey’s flagship short hedge fund strategy outrun the S&P 500 short ETFs by around 20 percentage points per annum since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
Philip Hempleman of Ardsley Partners
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. Now let’s check out the latest hedge fund action encompassing RumbleOn, Inc. (NASDAQ:RMBL).
How have hedgies been trading RumbleOn, Inc. (NASDAQ:RMBL)?
At the end of the third quarter, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. On the other hand, there were a total of 1 hedge funds with a bullish position in RMBL a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).
Among these funds, Nantahala Capital Management held the most valuable stake in RumbleOn, Inc. (NASDAQ:RMBL), which was worth $4.7 million at the end of the third quarter. On the second spot was Ardsley Partners which amassed $1.3 million worth of shares. North Run Capital, Potrero Capital Research, and Luxor Capital Group were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Ardsley Partners allocated the biggest weight to RumbleOn, Inc. (NASDAQ:RMBL), around 0.28% of its 13F portfolio. Trellus Management Company is also relatively very bullish on the stock, setting aside 0.23 percent of its 13F equity portfolio to RMBL.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren’t any hedge funds dumping their holdings during the third quarter, there weren’t any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven’t identified any viable catalysts that can attract investor attention.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as RumbleOn, Inc. (NASDAQ:RMBL) but similarly valued. We will take a look at Global Eagle Acquisition Corp (NASDAQ:ENT), Volt Information Sciences, Inc. (NYSE:VOLT), Mastech Holdings, Inc. (NYSE:MHH), and Champions Oncology, Inc. (NASDAQ:CSBR). This group of stocks’ market values resemble RMBL’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ENT | 7 | 23371 | 0 |
| VOLT | 5 | 5093 | 0 |
| MHH | 1 | 306 | 0 |
| CSBR | 2 | 1065 | -1 |
| Average | 3.75 | 7459 | -0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 3.75 hedge funds with bullish positions and the average amount invested in these stocks was $7 million. That figure was $7 million in RMBL’s case. Global Eagle Acquisition Corp (NASDAQ:ENT) is the most popular stock in this table. On the other hand Mastech Holdings, Inc. (NYSE:MHH) is the least popular one with only 1 bullish hedge fund positions. RumbleOn, Inc. (NASDAQ:RMBL) 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately RMBL wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on RMBL were disappointed as the stock returned -57.1% during the fourth quarter (through the end of November) 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 many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.
