In this article we will check out the progression of hedge fund sentiment towards Riot Blockchain, Inc (NASDAQ:RIOT) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Riot Blockchain, Inc (NASDAQ:RIOT) investors should be aware of an increase in enthusiasm from smart money recently. Our calculations also showed that RIOT isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
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 S&P 500 ETFs by 44 percentage points since March 2017 (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.
David E. Shaw of D.E. Shaw
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, legendary investor Bill Miller told investors to sell 7 extremely popular recession stocks last month. So, we went through his list and recommended another stock with 100% upside potential instead. We interview hedge fund managers and ask them about their best ideas. You can watch our latest hedge fund manager interview here and find out the name of the large-cap healthcare stock that Sio Capital’s Michael Castor expects to double. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s take a peek at the fresh hedge fund action encompassing Riot Blockchain, Inc (NASDAQ:RIOT).
What does smart money think about Riot Blockchain, Inc (NASDAQ:RIOT)?
At Q1’s end, a total of 3 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 50% from one quarter earlier. By comparison, 1 hedge funds held shares or bullish call options in RIOT 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, Renaissance Technologies held the most valuable stake in Riot Blockchain, Inc (NASDAQ:RIOT), which was worth $0.3 million at the end of the third quarter. On the second spot was Citadel Investment Group which amassed $0.2 million worth of shares. Citadel Investment Group was 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 Ancora Advisors allocated the biggest weight to Riot Blockchain, Inc (NASDAQ:RIOT), around 0.0008% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, earmarking 0.0003 percent of its 13F equity portfolio to RIOT.
As one would reasonably expect, key hedge funds were breaking ground themselves. Renaissance Technologies, created the largest position in Riot Blockchain, Inc (NASDAQ:RIOT). Renaissance Technologies had $0.3 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also made a $0.2 million investment in the stock during the quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Riot Blockchain, Inc (NASDAQ:RIOT) but similarly valued. These stocks are Kelso Technologies Inc (NYSE:KIQ), Energous Corporation (NASDAQ:WATT), Mannatech, Inc. (NASDAQ:MTEX), and CUI Global Inc (NASDAQ:CUI). This group of stocks’ market valuations resemble RIOT’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| KIQ | 1 | 10 | 0 |
| WATT | 1 | 60 | -4 |
| MTEX | 1 | 442 | 0 |
| CUI | 2 | 1220 | 0 |
| Average | 1.25 | 433 | -1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 1.25 hedge funds with bullish positions and the average amount invested in these stocks was $0 million. That figure was $1 million in RIOT’s case. CUI Global Inc (NASDAQ:CUI) is the most popular stock in this table. On the other hand Kelso Technologies Inc (NYSE:KIQ) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Riot Blockchain, Inc (NASDAQ:RIOT) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks returned 7.9% in 2020 through May 22nd but still managed to beat the market by 15.6 percentage points. Hedge funds were also right about betting on RIOT as the stock returned 168.9% so far in Q2 (through May 22nd) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.
