Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 750 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Redfin Corporation (NASDAQ:RDFN).
Redfin Corporation (NASDAQ:RDFN) was in 15 hedge funds’ portfolios at the end of September. RDFN investors should pay attention to an increase in activity from the world’s largest hedge funds lately. There were 10 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 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.
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 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a 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 Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. 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 also rely on the best performing hedge funds‘ buy/sell signals. We’re going to take a gander at the fresh hedge fund action encompassing Redfin Corporation (NASDAQ:RDFN).
How are hedge funds trading Redfin Corporation (NASDAQ:RDFN)?
At the end of the third quarter, a total of 15 of the hedge funds tracked by Insider Monkey were long this stock, a change of 50% from the previous quarter. By comparison, 12 hedge funds held shares or bullish call options 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 Immersion Capital, which reported holding $81 million worth of stock at the end of September. It was followed by Teton Capital with a $50.8 million position. Other investors bullish on the company included Point72 Asset Management, Tiger Global Management, and Intrinsic Edge Capital. In terms of the portfolio weights assigned to each position Immersion Capital allocated the biggest weight to Redfin Corporation (NASDAQ:RDFN), around 12.82% of its 13F portfolio. Teton Capital is also relatively very bullish on the stock, dishing out 8.42 percent of its 13F equity portfolio to RDFN.
As aggregate interest increased, key money managers have jumped into Redfin Corporation (NASDAQ:RDFN) headfirst. Intrinsic Edge Capital, managed by Mark Coe, assembled the biggest position in Redfin Corporation (NASDAQ:RDFN). Intrinsic Edge Capital had $15.6 million invested in the company at the end of the quarter. Richard Driehaus’s Driehaus Capital also made a $4.7 million investment in the stock during the quarter. The other funds with brand new RDFN positions are Tim David’s Guardian Point Capital, Brandon Haley’s Holocene Advisors, and Frank Slattery’s Symmetry Peak Management.
Let’s now take a look at hedge fund activity in other stocks similar to Redfin Corporation (NASDAQ:RDFN). We will take a look at Scorpio Tankers Inc. (NYSE:STNG), Grupo Simec S.A.B. de C.V. (NYSEAMEX:SIM), BP Midstream Partners LP (NYSE:BPMP), and BRP Inc. (NASDAQ:DOOO). This group of stocks’ market values resemble RDFN’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| STNG | 24 | 121555 | 1 |
| SIM | 1 | 2365 | 0 |
| BPMP | 5 | 25153 | 0 |
| DOOO | 10 | 67996 | 0 |
| Average | 10 | 54267 | 0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $54 million. That figure was $213 million in RDFN’s case. Scorpio Tankers Inc. (NYSE:STNG) is the most popular stock in this table. On the other hand Grupo Simec S.A.B. de C.V. (NYSEAMEX:SIM) is the least popular one with only 1 bullish hedge fund positions. Redfin Corporation (NASDAQ:RDFN) 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on RDFN as the stock returned 14.5% during the fourth quarter (through the end of November) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.
