Last year’s fourth quarter was a rough one for investors and many hedge funds, which were naturally unable to overcome the big dip in the broad market, as the S&P 500 fell by about 4.8% during 2018 and average hedge fund losing about 1%. The Russell 2000, composed of smaller companies, performed even worse, trailing the S&P by more than 6 percentage points, as investors fled less-known quantities for safe havens. Luckily hedge funds were shifting their holdings into large-cap stocks. The 20 most popular hedge fund stocks actually generated an average return of 41.1% in 2019 (through December 23) and outperformed the S&P 500 ETF by more than 10 percentage points. In this article we will study how hedge fund sentiment towards RealPage, Inc. (NASDAQ:RP) changed during the third quarter and how the stock performed in comparison to hedge fund consensus stocks.
Is RealPage, Inc. (NASDAQ:RP) a buy, sell, or hold? The best stock pickers are taking a bearish view. The number of long hedge fund positions retreated by 2 recently. Our calculations also showed that RP isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).
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 flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Ricky Sandler of Eminence Capital
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. With all of this in mind we’re going to analyze the new hedge fund action regarding RealPage, Inc. (NASDAQ:RP).
What have hedge funds been doing with RealPage, Inc. (NASDAQ:RP)?
Heading into the fourth quarter of 2019, a total of 31 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -6% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in RP over the last 17 quarters. With hedgies’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
Among these funds, Stockbridge Partners held the most valuable stake in RealPage, Inc. (NASDAQ:RP), which was worth $189.8 million at the end of the third quarter. On the second spot was Eminence Capital which amassed $158.8 million worth of shares. Echo Street Capital Management, Junto Capital Management, and Point72 Asset Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Stockbridge Partners allocated the biggest weight to RealPage, Inc. (NASDAQ:RP), around 7.53% of its 13F portfolio. Lucha Capital Management is also relatively very bullish on the stock, dishing out 5.1 percent of its 13F equity portfolio to RP.
Due to the fact that RealPage, Inc. (NASDAQ:RP) has experienced a decline in interest from the entirety of the hedge funds we track, it’s easy to see that there exists a select few funds who sold off their entire stakes by the end of the third quarter. At the top of the heap, Panayotis Takis Sparaggis’s Alkeon Capital Management dumped the largest stake of all the hedgies watched by Insider Monkey, comprising an estimated $26.6 million in stock. Jay Genzer’s fund, Thames Capital Management, also sold off its stock, about $16.9 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest was cut by 2 funds by the end of the third quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as RealPage, Inc. (NASDAQ:RP) but similarly valued. These stocks are Casey’s General Stores, Inc. (NASDAQ:CASY), Guardant Health, Inc. (NASDAQ:GH), AECOM (NYSE:ACM), and Cemex SAB de CV (NYSE:CX). This group of stocks’ market caps are similar to RP’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CASY | 16 | 103612 | -2 |
| GH | 24 | 410215 | 5 |
| ACM | 26 | 956455 | 4 |
| CX | 9 | 59628 | -2 |
| Average | 18.75 | 382478 | 1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.75 hedge funds with bullish positions and the average amount invested in these stocks was $382 million. That figure was $569 million in RP’s case. AECOM (NYSE:ACM) is the most popular stock in this table. On the other hand Cemex SAB de CV (NYSE:CX) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks RealPage, Inc. (NASDAQ:RP) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Unfortunately RP wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on RP were disappointed as the stock returned 11.6% so far in 2019 (through 12/23) and trailed 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 65 percent of these stocks already outperformed the market in 2019.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
