At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Radian Group Inc (NYSE:RDN).
Is Radian Group Inc (NYSE:RDN) an exceptional investment today? Money managers are becoming less confident. The number of long hedge fund bets dropped by 1 lately. Our calculations also showed that RDN isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). RDN was in 28 hedge funds’ portfolios at the end of the first quarter of 2020. There were 29 hedge funds in our database with RDN holdings at the end of the previous quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a multitude of signals stock market investors can use to grade their stock investments. A pair of the most underrated signals are hedge fund and insider trading sentiment. Our experts have shown that, historically, those who follow the top picks of the elite hedge fund managers can trounce the broader indices by a superb margin (see the details here).
Noam Gottesman of GLG Partners
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. 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 the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s view the fresh hedge fund action encompassing Radian Group Inc (NYSE:RDN).
How are hedge funds trading Radian Group Inc (NYSE:RDN)?
Heading into the second quarter of 2020, a total of 28 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -3% from the previous quarter. The graph below displays the number of hedge funds with bullish position in RDN over the last 18 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Point72 Asset Management was the largest shareholder of Radian Group Inc (NYSE:RDN), with a stake worth $28.1 million reported as of the end of September. Trailing Point72 Asset Management was Callodine Capital Management, which amassed a stake valued at $20.5 million. EJF Capital, AQR Capital Management, and GLG Partners 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 Callodine Capital Management allocated the biggest weight to Radian Group Inc (NYSE:RDN), around 8.36% of its 13F portfolio. EJF Capital is also relatively very bullish on the stock, designating 3.5 percent of its 13F equity portfolio to RDN.
Because Radian Group Inc (NYSE:RDN) has witnessed a decline in interest from the entirety of the hedge funds we track, it’s easy to see that there was a specific group of funds that slashed their entire stakes by the end of the first quarter. It’s worth mentioning that Dmitry Balyasny’s Balyasny Asset Management sold off the biggest investment of the “upper crust” of funds watched by Insider Monkey, worth close to $12 million in stock. Mike Vranos’s fund, Ellington, also sold off its stock, about $5.4 million worth. These transactions are interesting, as aggregate hedge fund interest dropped by 1 funds by the end of the first quarter.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Radian Group Inc (NYSE:RDN) but similarly valued. We will take a look at bluebird bio Inc (NASDAQ:BLUE), Ultragenyx Pharmaceutical Inc (NASDAQ:RARE), Regal Beloit Corporation (NYSE:RBC), and Freshpet Inc (NASDAQ:FRPT). All of these stocks’ market caps are closest to RDN’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BLUE | 27 | 286752 | -6 |
| RARE | 18 | 236444 | 0 |
| RBC | 19 | 204663 | -5 |
| FRPT | 24 | 141032 | 4 |
| Average | 22 | 217223 | -1.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 22 hedge funds with bullish positions and the average amount invested in these stocks was $217 million. That figure was $121 million in RDN’s case. bluebird bio Inc (NASDAQ:BLUE) is the most popular stock in this table. On the other hand Ultragenyx Pharmaceutical Inc (NASDAQ:RARE) is the least popular one with only 18 bullish hedge fund positions. Compared to these stocks Radian Group Inc (NYSE:RDN) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks returned 8.3% in 2020 through the end of May but still managed to beat the market by 13.2 percentage points. Hedge funds were also right about betting on RDN as the stock returned 23.6% so far in Q2 (through the end of May) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
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Disclosure: None. This article was originally published at Insider Monkey.
