Billionaire hedge fund managers such as Steve Cohen and Stan Druckenmiller can generate millions or even billions of dollars every year by pinning down high-potential small-cap stocks and pouring cash into these candidates. Small-cap stocks are overlooked by most investors, brokerage houses, and financial services hubs, while the unlimited research abilities of the big players within the hedge fund industry can easily identify the undervalued and high-potential stocks that reside the ignored corners of equity markets. There are numerous small-cap stocks that have turned out to be great winners, which is one of the main reasons the Insider Monkey team pays close attention to the hedge fund activity in relation to these stocks.
RingCentral Inc (NYSE:RNG) investors should pay attention to an increase in hedge fund interest in recent months. RNG was in 30 hedge funds’ portfolios at the end of September. There were 27 hedge funds in our database with RNG holdings at the end of the previous quarter. At the end of this article we will also compare RNG to other stocks including Plantronics, Inc. (NYSE:PLT), DigitalGlobe Inc (NYSE:DGI), and Trex Company, Inc. (NYSE:TREX) to get a better sense of its popularity.
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We follow over 700 hedge funds and other institutional investors and by analyzing their quarterly 13F filings, we identify stocks that they are collectively bullish on and develop investment strategies based on this data. One strategy that outperformed the market over the last year involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively most bullish on. Over the past year, this strategy generated returns of 18%, topping the 8% gain registered by S&P 500 ETFs. We launched this strategy 2.5 years ago and it returned more than 39% since then, vs. 22% gain registered by the S&P 500 ETFs.
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What have hedge funds been doing with RingCentral Inc (NYSE:RNG)?
At the end of the third quarter, a total of 30 of the hedge funds tracked by Insider Monkey were long this stock, a gain of 11% from the previous quarter. By comparison, 26 hedge funds held shares or bullish call options in RNG heading into this year. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Columbus Circle Investors, led by Principal Global Investors, holds the largest position in RingCentral Inc (NYSE:RNG). Columbus Circle Investors has a $48.5 million position in the stock. Coming in second is Anand Parekh of Alyeska Investment Group, with a $33.4 million position. Other professional money managers that are bullish encompass George McCabe’s Portolan Capital Management, Jim Simons’ Renaissance Technologies and Dennis Puri and Oliver Keller’s Hunt Lane Capital. We should note that Hunt Lane Capital is among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
Consequently, some big names were breaking ground themselves. Arrowstreet Capital, led by Peter Rathjens, Bruce Clarke and John Campbell, established the biggest position in RingCentral Inc (NYSE:RNG). Arrowstreet Capital had $8.7 million invested in the company at the end of the quarter. Brad Farber’s Atika Capital also made a $2.1 million investment in the stock during the quarter. The other funds with new positions in the stock are Dmitry Balyasny’s Balyasny Asset Management, Jack Ripsteen’s Potrero Capital Research, and Peter Algert and Kevin Coldiron’s Algert Coldiron Investors.
Let’s now review hedge fund activity in other stocks similar to RingCentral Inc (NYSE:RNG). These stocks are Plantronics, Inc. (NYSE:PLT), DigitalGlobe Inc (NYSE:DGI), Trex Company, Inc. (NYSE:TREX), and Viavi Solutions Inc (NASDAQ:VIAV). This group of stocks’ market caps match RNG’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PLT | 12 | 48573 | -2 |
| DGI | 16 | 186754 | 1 |
| TREX | 10 | 22569 | 3 |
| VIAV | 23 | 215214 | 2 |
As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $118 million. That figure was $242 million in RNG’s case. Viavi Solutions Inc (NASDAQ:VIAV) is the most popular stock in this table. On the other hand Trex Company, Inc. (NYSE:TREX) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks RingCentral Inc (NYSE:RNG) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
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