At Insider Monkey we track the activity of some of the best-performing hedge funds like Appaloosa Management, Baupost, and Tiger Global because we determined that some of the stocks that they are collectively bullish on can help us generate returns above the broader indices. Out of thousands of stocks that hedge funds invest in, small-caps can provide the best returns over the long term due to the fact that these companies are less efficiently priced and are usually under the radars of mass-media, analysts and dumb money. This is why we follow the smart money moves in the small-cap space.
Altisource Residential Corporation (NYSE:RESI) has experienced a decrease in enthusiasm from smart money lately. RESI was in 13 hedge funds’ portfolios at the end of the fourth quarter of 2018. There were 15 hedge funds in our database with RESI positions at the end of the previous quarter. Our calculations also showed that RESI isn’t among the 30 most popular stocks among hedge funds.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.5% through March 12, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We’re going to take a peek at the latest hedge fund action surrounding Altisource Residential Corporation (NYSE:RESI).
Hedge fund activity in Altisource Residential Corporation (NYSE:RESI)
At Q4’s end, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -13% from the second quarter of 2018. By comparison, 10 hedge funds held shares or bullish call options in RESI a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Andy Redleaf’s Whitebox Advisors has the largest position in Altisource Residential Corporation (NYSE:RESI), worth close to $7.9 million, accounting for 0.4% of its total 13F portfolio. On Whitebox Advisors’s heels is Snow Park Capital Partners, led by Jeffrey Pierce, holding a $5.3 million position; the fund has 10.3% of its 13F portfolio invested in the stock. Remaining professional money managers that are bullish encompass Christian Leone’s Luxor Capital Group, Ken Griffin’s Citadel Investment Group and Matthew Hulsizer’s PEAK6 Capital Management.
Due to the fact that Altisource Residential Corporation (NYSE:RESI) has witnessed declining sentiment from the aggregate hedge fund industry, it’s safe to say that there were a few hedgies who sold off their full holdings last quarter. At the top of the heap, Israel Englander’s Millennium Management dropped the biggest stake of all the hedgies tracked by Insider Monkey, totaling close to $11.3 million in stock, and Jim Simons’s Renaissance Technologies was right behind this move, as the fund dropped about $4.8 million worth. These bearish behaviors are interesting, as total hedge fund interest fell by 2 funds last quarter.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Altisource Residential Corporation (NYSE:RESI) but similarly valued. These stocks are Natural Resource Partners LP (NYSE:NRP), American Public Education, Inc. (NASDAQ:APEI), Ethan Allen Interiors Inc. (NYSE:ETH), and Luxfer Holdings PLC (NYSE:LXFR). This group of stocks’ market caps match RESI’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NRP | 4 | 8080 | -1 |
| APEI | 16 | 76944 | 3 |
| ETH | 15 | 58548 | 3 |
| LXFR | 12 | 78785 | 4 |
| Average | 11.75 | 55589 | 2.25 |
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 $56 million. That figure was $25 million in RESI’s case. American Public Education, Inc. (NASDAQ:APEI) is the most popular stock in this table. On the other hand Natural Resource Partners LP (NYSE:NRP) is the least popular one with only 4 bullish hedge fund positions. Altisource Residential Corporation (NYSE:RESI) 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 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 RESI wasn’t nearly as popular as these 15 stock and hedge funds that were betting on RESI were disappointed as the stock returned 12.3% 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.
