Looking for stocks with high upside potential? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 13.1% in the 2.5 months of 2019 (including dividend payments). Conversely, hedge funds’ 15 preferred S&P 500 stocks generated a return of 19.7% during the same period, with 93% of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds’ stock picks generate superior risk-adjusted returns. That’s why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like Realogy Holdings Corp (NYSE:RLGY).
Realogy Holdings Corp (NYSE:RLGY) has seen a decrease in hedge fund sentiment lately. RLGY was in 20 hedge funds’ portfolios at the end of the fourth quarter of 2018. There were 23 hedge funds in our database with RLGY positions at the end of the previous quarter. Our calculations also showed that RLGY isn’t among the 30 most popular stocks among hedge funds.
If you’d ask most investors, hedge funds are assumed to be underperforming, outdated investment vehicles of yesteryear. While there are over 8000 funds with their doors open at present, Our researchers choose to focus on the elite of this club, about 750 funds. Most estimates calculate that this group of people have their hands on the majority of the hedge fund industry’s total capital, and by tracking their best equity investments, Insider Monkey has determined many investment strategies that have historically surpassed the market. Insider Monkey’s flagship hedge fund strategy defeated the S&P 500 index by nearly 5 percentage points per annum since its inception in May 2014 through early November 2018. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 27.5% since February 2017 (through March 12th) even though the market was up nearly 25% during the same period. We just shared a list of 6 short targets in our latest quarterly update and they are already down an average of 6% in less than a month.
Let’s check out the recent hedge fund action surrounding Realogy Holdings Corp (NYSE:RLGY).
Hedge fund activity in Realogy Holdings Corp (NYSE:RLGY)
Heading into the first quarter of 2019, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -13% from the previous quarter. On the other hand, there were a total of 27 hedge funds with a bullish position in RLGY a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Southeastern Asset Management held the most valuable stake in Realogy Holdings Corp (NYSE:RLGY), which was worth $139.7 million at the end of the fourth quarter. On the second spot was Okumus Fund Management which amassed $111.9 million worth of shares. Moreover, Tremblant Capital, Pzena Investment Management, and Millennium Management were also bullish on Realogy Holdings Corp (NYSE:RLGY), allocating a large percentage of their portfolios to this stock.
Since Realogy Holdings Corp (NYSE:RLGY) has witnessed bearish sentiment from the entirety of the hedge funds we track, we can see that there exists a select few money managers that elected to cut their entire stakes by the end of the third quarter. Intriguingly, Jonathan Bloomberg’s BloombergSen cut the largest position of all the hedgies followed by Insider Monkey, comprising an estimated $12.5 million in stock, and Thomas E. Claugus’s GMT Capital was right behind this move, as the fund sold off about $8.1 million worth. These transactions are intriguing to say the least, as total hedge fund interest fell by 3 funds by the end of the third quarter.
Let’s go over hedge fund activity in other stocks similar to Realogy Holdings Corp (NYSE:RLGY). We will take a look at Madrigal Pharmaceuticals, Inc. (NASDAQ:MDGL), The Bank of N.T. Butterfield & Son Limited (NYSE:NTB), Kayne Anderson MLP/Midstream Investment Company (NYSE:KYN), and TowneBank (NASDAQ:TOWN). This group of stocks’ market caps match RLGY’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MDGL | 19 | 287555 | -7 |
| NTB | 16 | 114434 | 0 |
| KYN | 4 | 5651 | 1 |
| TOWN | 8 | 31981 | -1 |
| Average | 11.75 | 109905 | -1.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.75 hedge funds with bullish positions and the average amount invested in these stocks was $110 million. That figure was $445 million in RLGY’s case. Madrigal Pharmaceuticals, Inc. (NASDAQ:MDGL) is the most popular stock in this table. On the other hand Kayne Anderson MLP/Midstream Investment Company (NYSE:KYN) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Realogy Holdings Corp (NYSE:RLGY) is more popular among hedge funds. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately RLGY wasn’t nearly as popular as these 15 stock and hedge funds that were betting on RLGY were disappointed as the stock returned -15.5% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.
