Here is What Hedge Funds Think About Radian Group Inc (RDN)

We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Melvin Capital’s recent GameStop losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Radian Group Inc (NYSE:RDN).

Radian Group Inc (NYSE:RDN) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 30 hedge funds’ portfolios at the end of June. Our calculations also showed that RDN isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings). At the end of this article we will also compare RDN to other stocks including Signet Jewelers Limited (NYSE:SIG), Premier Inc (NASDAQ:PINC), and Quaker Chemical Corp (NYSE:KWR) to get a better sense of its popularity.

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 monthly stock picks returned 185.4% since March 2017 and outperformed the S&P 500 ETFs by more than 79 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Minhua Zhang of Weld Capital Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With all of this in mind we’re going to take a glance at the new hedge fund action regarding Radian Group Inc (NYSE:RDN).

Do Hedge Funds Think RDN Is A Good Stock To Buy Now?

At Q2’s end, a total of 30 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the first quarter of 2020. By comparison, 33 hedge funds held shares or bullish call options in RDN a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Radian Group Inc (NYSE:RDN) was held by Rima Senvest Management, which reported holding $60.8 million worth of stock at the end of June. It was followed by King Street Capital with a $56.2 million position. Other investors bullish on the company included Redwood Capital Management, Millennium Management, and Rubric Capital Management. In terms of the portfolio weights assigned to each position Callodine Capital Management allocated the biggest weight to Radian Group Inc (NYSE:RDN), around 6.77% of its 13F portfolio. King Street Capital is also relatively very bullish on the stock, designating 4.62 percent of its 13F equity portfolio to RDN.

Since Radian Group Inc (NYSE:RDN) has witnessed a decline in interest from hedge fund managers, it’s easy to see that there is a sect of hedge funds who were dropping their full holdings in the second quarter. It’s worth mentioning that Dmitry Balyasny’s Balyasny Asset Management dumped the largest investment of the 750 funds monitored by Insider Monkey, valued at an estimated $5.9 million in stock, and Matthew Hulsizer’s PEAK6 Capital Management was right behind this move, as the fund dumped about $3.4 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s go over 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 Signet Jewelers Limited (NYSE:SIG), Premier Inc (NASDAQ:PINC), Quaker Chemical Corp (NYSE:KWR), Sunnova Energy International Inc. (NYSE:NOVA), Alarm.com Holdings Inc (NASDAQ:ALRM), Altra Industrial Motion Corp. (NASDAQ:AIMC), and Matador Resources Co (NYSE:MTDR). All of these stocks’ market caps are similar to RDN’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 19.4 hedge funds with bullish positions and the average amount invested in these stocks was $348 million. That figure was $359 million in RDN’s case. Signet Jewelers Limited (NYSE:SIG) is the most popular stock in this table. On the other hand Altra Industrial Motion Corp. (NASDAQ:AIMC) is the least popular one with only 6 bullish hedge fund positions. Radian Group Inc (NYSE:RDN) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for RDN is 73.1. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24.9% in 2021 through October 15th and still beat the market by 4.5 percentage points. Hedge funds were also right about betting on RDN as the stock returned 9.7% since the end of Q2 (through 10/15) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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Disclosure: None. This article was originally published at Insider Monkey.