How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Retail Opportunity Investments Corp (NASDAQ:ROIC).
Retail Opportunity Investments Corp (NASDAQ:ROIC) was in 18 hedge funds’ portfolios at the end of the third quarter of 2019. ROIC has experienced an increase in enthusiasm from smart money recently. There were 13 hedge funds in our database with ROIC positions at the end of the previous quarter. Our calculations also showed that ROIC 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.
If you’d ask most market participants, hedge funds are seen as unimportant, outdated investment vehicles of years past. While there are greater than 8000 funds in operation at present, Our experts choose to focus on the crème de la crème of this club, approximately 750 funds. Most estimates calculate that this group of people preside over the majority of the hedge fund industry’s total asset base, and by paying attention to their finest investments, Insider Monkey has revealed various investment strategies that have historically outstripped the market. Insider Monkey’s flagship short hedge fund strategy outrun the S&P 500 short ETFs by around 20 percentage points a year 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 .
Dmitry Balyasny of Balyasny Asset Managemnet
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 analyze the key hedge fund action encompassing Retail Opportunity Investments Corp (NASDAQ:ROIC).
How have hedgies been trading Retail Opportunity Investments Corp (NASDAQ:ROIC)?
At the end of the third quarter, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 38% from one quarter earlier. On the other hand, there were a total of 11 hedge funds with a bullish position in ROIC a year ago. With the smart money’s sentiment swirling, there exists an “upper tier” of key hedge fund managers who were upping their holdings substantially (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Renaissance Technologies has the number one position in Retail Opportunity Investments Corp (NASDAQ:ROIC), worth close to $31.7 million, corresponding to less than 0.1%% of its total 13F portfolio. Sitting at the No. 2 spot is Dmitry Balyasny of Balyasny Asset Management, with a $16 million position; 0.1% of its 13F portfolio is allocated to the company. Remaining peers that are bullish include John Overdeck and David Siegel’s Two Sigma Advisors, Israel Englander’s Millennium Management and David E. Shaw’s D E Shaw. In terms of the portfolio weights assigned to each position Neo Ivy Capital allocated the biggest weight to Retail Opportunity Investments Corp (NASDAQ:ROIC), around 0.42% of its 13F portfolio. Weld Capital Management is also relatively very bullish on the stock, designating 0.13 percent of its 13F equity portfolio to ROIC.
With a general bullishness amongst the heavyweights, specific money managers were breaking ground themselves. Winton Capital Management, managed by David Harding, established the largest position in Retail Opportunity Investments Corp (NASDAQ:ROIC). Winton Capital Management had $1.5 million invested in the company at the end of the quarter. Paul Tudor Jones’s Tudor Investment Corp also made a $1.1 million investment in the stock during the quarter. The other funds with new positions in the stock are Michael Gelband’s ExodusPoint Capital, Benjamin A. Smith’s Laurion Capital Management, and Minhua Zhang’s Weld Capital Management.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Retail Opportunity Investments Corp (NASDAQ:ROIC) but similarly valued. These stocks are Dana Incorporated (NYSE:DAN), Ambarella Inc (NASDAQ:AMBA), ESCO Technologies Inc. (NYSE:ESE), and Ladder Capital Corp (NYSE:LADR). This group of stocks’ market values are closest to ROIC’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| DAN | 25 | 192399 | 0 |
| AMBA | 28 | 255178 | 7 |
| ESE | 8 | 3101 | 4 |
| LADR | 12 | 46418 | -1 |
| Average | 18.25 | 124274 | 2.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.25 hedge funds with bullish positions and the average amount invested in these stocks was $124 million. That figure was $77 million in ROIC’s case. Ambarella Inc (NASDAQ:AMBA) is the most popular stock in this table. On the other hand ESCO Technologies Inc. (NYSE:ESE) is the least popular one with only 8 bullish hedge fund positions. Retail Opportunity Investments Corp (NASDAQ:ROIC) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and 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 ROIC wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); ROIC investors were disappointed as the stock returned 0.1% during the first two months of the fourth quarter 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 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
