Like everyone else, elite investors make mistakes. Some of their top consensus picks, such as Amazon, Facebook and Alibaba, have not done well in Q4 due to various reasons. Nevertheless, the data show elite investors’ consensus picks have done well on average over the long-term. The top 20 stocks among hedge funds beat the S&P 500 Index ETF by more than 6 percentage points so far this year. Because their consensus picks have done well, we pay attention to what elite funds think before doing extensive research on a stock. In this article, we take a closer look at RTI Surgical Holdings, Inc. (NASDAQ:RTIX) from the perspective of those elite funds.
Is RTI Surgical Holdings, Inc. (NASDAQ:RTIX) ready to rally soon? Money managers are becoming more confident. The number of bullish hedge fund positions advanced by 2 in recent months. Our calculations also showed that RTIX isn’t among the 30 most popular stocks among hedge funds.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
We’re going to take a gander at the fresh hedge fund action encompassing RTI Surgical Holdings, Inc. (NASDAQ:RTIX).
What have hedge funds been doing with RTI Surgical Holdings, Inc. (NASDAQ:RTIX)?
At the end of the first quarter, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, a change of 17% from the previous quarter. By comparison, 13 hedge funds held shares or bullish call options in RTIX a year ago. With hedgies’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).
More specifically, Rock Springs Capital Management was the largest shareholder of RTI Surgical Holdings, Inc. (NASDAQ:RTIX), with a stake worth $11.7 million reported as of the end of March. Trailing Rock Springs Capital Management was Renaissance Technologies, which amassed a stake valued at $8.6 million. D E Shaw, Rutabaga Capital Management, and Royce & Associates were also very fond of the stock, giving the stock large weights in their portfolios.
Now, key hedge funds were breaking ground themselves. Omega Advisors, managed by Leon Cooperman, initiated the biggest position in RTI Surgical Holdings, Inc. (NASDAQ:RTIX). Omega Advisors had $1.2 million invested in the company at the end of the quarter. Michael Gelband’s ExodusPoint Capital also made a $0.2 million investment in the stock during the quarter. The only other fund with a brand new RTIX position is Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.
Let’s now take a look at hedge fund activity in other stocks similar to RTI Surgical Holdings, Inc. (NASDAQ:RTIX). We will take a look at Akorn, Inc. (NASDAQ:AKRX), Yintech Investment Holdings Limited (NASDAQ:YIN), Trinity Merger Corp. (NASDAQ:TMCX), and Secoo Holding Limited (NASDAQ:SECO). All of these stocks’ market caps are similar to RTIX’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AKRX | 16 | 64437 | 1 |
| YIN | 2 | 494 | 0 |
| TMCX | 15 | 65966 | 1 |
| SECO | 8 | 18349 | 6 |
| Average | 10.25 | 37312 | 2 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.25 hedge funds with bullish positions and the average amount invested in these stocks was $37 million. That figure was $41 million in RTIX’s case. Akorn, Inc. (NASDAQ:AKRX) is the most popular stock in this table. On the other hand Yintech Investment Holdings Limited (NASDAQ:YIN) is the least popular one with only 2 bullish hedge fund positions. RTI Surgical Holdings, Inc. (NASDAQ:RTIX) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately RTIX wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on RTIX were disappointed as the stock returned -28.1% during the same period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.
