We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. 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 Retail Opportunity Investments Corp (NASDAQ:ROIC).
Retail Opportunity Investments Corp (NASDAQ:ROIC) investors should pay attention to an increase in hedge fund sentiment recently. Our calculations also showed that ROIC isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
In the financial world there are dozens of formulas market participants can use to grade their stock investments. Some of the less known formulas are hedge fund and insider trading sentiment. Our experts have shown that, historically, those who follow the top picks of the elite fund managers can trounce their index-focused peers by a healthy margin (see the details here).
John Overdeck of Two Sigma Advisors
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. 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. With all of this in mind let’s check out the recent hedge fund action surrounding Retail Opportunity Investments Corp (NASDAQ:ROIC).
How have hedgies been trading Retail Opportunity Investments Corp (NASDAQ:ROIC)?
At Q4’s end, a total of 21 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 5% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards ROIC over the last 18 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Renaissance Technologies, holds the largest position in Retail Opportunity Investments Corp (NASDAQ:ROIC). Renaissance Technologies has a $35.6 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Sitting at the No. 2 spot is Balyasny Asset Management, managed by Dmitry Balyasny, which holds a $21.4 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Some other professional money managers with similar optimism include John Overdeck and David Siegel’s Two Sigma Advisors, David Harding’s Winton Capital Management and Paul Tudor Jones’s Tudor Investment Corp. 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 0.81% of its 13F portfolio. Winton Capital Management is also relatively very bullish on the stock, designating 0.19 percent of its 13F equity portfolio to ROIC.
Now, key hedge funds have jumped into Retail Opportunity Investments Corp (NASDAQ:ROIC) headfirst. Paloma Partners, managed by Donald Sussman, initiated the most valuable position in Retail Opportunity Investments Corp (NASDAQ:ROIC). Paloma Partners had $0.3 million invested in the company at the end of the quarter. Cliff Asness’s AQR Capital Management also initiated a $0.3 million position during the quarter. The only other fund with a new position in the stock is Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital.
Let’s check out 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 Focus Financial Partners Inc. (NASDAQ:FOCS), Change Healthcare Inc. (NASDAQ:CHNG), Meritor Inc (NYSE:MTOR), and AMTD International Inc. (NYSE:HKIB). This group of stocks’ market caps are closest to ROIC’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FOCS | 12 | 47432 | 1 |
| CHNG | 25 | 311536 | 3 |
| MTOR | 29 | 412626 | 4 |
| HKIB | 1 | 17460 | 0 |
| Average | 16.75 | 197264 | 2 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.75 hedge funds with bullish positions and the average amount invested in these stocks was $197 million. That figure was $100 million in ROIC’s case. Meritor Inc (NYSE:MTOR) is the most popular stock in this table. On the other hand AMTD International Inc. (NYSE:HKIB) is the least popular one with only 1 bullish hedge fund positions. Retail Opportunity Investments Corp (NASDAQ:ROIC) 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 13.0% in 2020 through April 6th but beat the market by 4.2 percentage points. Unfortunately ROIC wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on ROIC were disappointed as the stock returned -57.3% during the same time period 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.
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.
