With the first-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the first quarter. One of these stocks was Rapid7 Inc (NASDAQ:RPD).
Is Rapid7 Inc (NASDAQ:RPD) a buy right now? Hedge funds are taking an optimistic view. The number of bullish hedge fund positions advanced by 3 recently. Our calculations also showed that RPD isn’t among the 30 most popular stocks among hedge funds.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Let’s take a look at the key hedge fund action surrounding Rapid7 Inc (NASDAQ:RPD).
How have hedgies been trading Rapid7 Inc (NASDAQ:RPD)?
At the end of the first quarter, a total of 27 of the hedge funds tracked by Insider Monkey were long this stock, a change of 13% from one quarter earlier. By comparison, 16 hedge funds held shares or bullish call options in RPD a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Rapid7 Inc (NASDAQ:RPD) was held by SQN Investors, which reported holding $62.6 million worth of stock at the end of March. It was followed by Alkeon Capital Management with a $52.9 million position. Other investors bullish on the company included Citadel Investment Group, Columbus Circle Investors, and Renaissance Technologies.
As aggregate interest increased, some big names were breaking ground themselves. Alkeon Capital Management, managed by Panayotis Takis Sparaggis, established the most outsized position in Rapid7 Inc (NASDAQ:RPD). Alkeon Capital Management had $52.9 million invested in the company at the end of the quarter. Josh Donfeld and David Rogers’s Castle Hook Partners also made a $22.7 million investment in the stock during the quarter. The other funds with new positions in the stock are Matthew Hulsizer’s PEAK6 Capital Management, Ira Unschuld’s Brant Point Investment Management, and Mark Kingdon’s Kingdon Capital.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Rapid7 Inc (NASDAQ:RPD) but similarly valued. These stocks are South State Corporation (NASDAQ:SSB), First Interstate Bancsystem Inc (NASDAQ:FIBK), Cadence Bancorporation (NYSE:CADE), and Vonage Holdings Corp. (NYSE:VG). All of these stocks’ market caps resemble RPD’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SSB | 13 | 25616 | -1 |
| FIBK | 11 | 93579 | -2 |
| CADE | 22 | 145431 | 4 |
| VG | 34 | 259024 | 12 |
| Average | 20 | 130913 | 3.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $131 million. That figure was $387 million in RPD’s case. Vonage Holdings Corp. (NYSE:VG) is the most popular stock in this table. On the other hand First Interstate Bancsystem Inc (NASDAQ:FIBK) is the least popular one with only 11 bullish hedge fund positions. Rapid7 Inc (NASDAQ:RPD) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Hedge funds were also right about betting on RPD as the stock returned 3.5% during the same period and outperformed the market by an even larger margin. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.
