Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips on the charts, usually don’t make them change their opinion towards a company. This time it may be different. During the third quarter we observed increased volatility and small-cap stocks underperformed the market. Hedge fund investor letters indicated that they are cutting their overall exposure, closing out some position and doubling down on others. Let’s take a look at the hedge fund sentiment towards Renren Inc (NYSE:RENN) to find out whether it was one of their high conviction long-term ideas.
Is Renren Inc (NYSE:RENN) a marvelous investment now? Prominent investors are reducing their bets on the stock. The number of long hedge fund bets was cut by 1 recently. At the end of this article we will also compare RENN to other stocks, including TerraForm Global Inc (NASDAQ:GLBL), MiMedx Group Inc (NASDAQ:MDXG), and American Woodmark Corporation (NASDAQ:AMWD) to get a better sense of its popularity.
In the financial world, there are several metrics stock market investors employ to assess stocks. Some of the most under-the-radar metrics are hedge fund and insider trading signals. Our researchers have shown that, historically, those who follow the top picks of the best fund managers can outclass the broader indices by a significant margin (see the details here).
Now, let’s view the recent action regarding Renren Inc (NYSE:RENN).
How have hedgies been trading Renren Inc (NYSE:RENN)?
Heading into Q4, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -14% from one quarter earlier. With hedge funds’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Ken Griffin’s Citadel Investment Group has the most valuable position in Renren Inc (NYSE:RENN), worth close to $5.4 million, accounting for less than 0.1%% of its total 13F portfolio. On Citadel Investment Group’s heels is Visium Asset Management, managed by Jacob Gottlieb, which holds a $2.4 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Other hedge funds and institutional investors with similar optimism encompass Paul Solit’s Potomac Capital Management and Matthew Hulsizer’s PEAK6 Capital Management.
Since Renren Inc (NYSE:RENN) has experienced a declination in interest from the entirety of the hedge funds we track, it’s safe to say that there lies a certain “tier” of fund managers that slashed their entire stakes last quarter. Interestingly, Paul Marshall and Ian Wace’s Marshall Wace LLP said goodbye to the largest stake of the “upper crust” of funds monitored by Insider Monkey, valued at close to $0.1 million in stock. Gavin Saitowitz and Cisco J. del Valle’s fund, Springbok Capital, also cut its stock, about $0.1 million worth. These moves are intriguing to say the least, as total hedge fund interest dropped by 1 funds last quarter.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Renren Inc (NYSE:RENN) but similarly valued. These stocks are TerraForm Global Inc (NASDAQ:GLBL), MiMedx Group Inc (NASDAQ:MDXG), American Woodmark Corporation (NASDAQ:AMWD), and Sunrun Inc (NASDAQ:RUN). This group of stocks’ market valuations resemble RENN’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| GLBL | 23 | 251228 | 23 |
| MDXG | 17 | 24004 | -5 |
| AMWD | 15 | 106150 | -5 |
| RUN | 14 | 159222 | 14 |
As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $135 million. That figure was just $8 million in RENN’s case. TerraForm Global Inc (NASDAQ:GLBL) is the most popular stock in this table, while Sunrun Inc (NASDAQ:RUN) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks Renren Inc (NYSE:RENN) is even less popular than RUN. Considering that hedge funds aren’t fond of this stock in relation to other companies mentioned in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.
