The elite funds run by legendary investors such as Dan Loeb and David Tepper make hundreds of millions of dollars for themselves and their investors by spending enormous resources doing research on small cap stocks that big investment banks don’t follow. Because of their pay structures, they have strong incentive to do the research necessary to beat the market. That’s why we pay close attention to what they think in small cap stocks. In this article, we take a closer look at Radian Group Inc (NYSE:RDN) from the perspective of those elite funds.
Is Radian Group Inc (NYSE:RDN) worth your attention right now? Investors who are in the know are taking a bearish view. The number of bullish hedge fund positions shrunk by 3 recently. RDN was in 28 hedge funds’ portfolios at the end of September. There were 31 hedge funds in our database with RDN holdings at the end of the previous quarter. At the end of this article we will also compare RDN to other stocks including Coherent, Inc. (NASDAQ:COHR), AMAYA INC (NASDAQ:AYA), and Big Lots, Inc. (NYSE:BIG) to get a better sense of its popularity.
Follow Radian Group Inc (NYSE:RDN)
Follow Radian Group Inc (NYSE:RDN)
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
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Now, we’re going to view the recent action encompassing Radian Group Inc (NYSE:RDN).
How have hedgies been trading Radian Group Inc (NYSE:RDN)?
Heading into the fourth quarter of 2016, a total of 28 of the hedge funds tracked by Insider Monkey were long this stock, a 10% drop from the second quarter of 2016. Hedge fund ownership has now dropped by 15% over the past year. With hedge funds’ capital changing hands, there exists a few noteworthy hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Maverick Capital, managed by Lee Ainslie, holds the biggest position in Radian Group Inc (NYSE:RDN). Maverick Capital has a $126 million position in the stock, comprising 1.5% of its 13F portfolio. The second largest stake is held by Senator Investment Group, managed by Doug Silverman and Alexander Klabin, which holds a $52.8 million position. Some other members of the smart money that hold long positions include Jim Simons’ Renaissance Technologies, Israel Englander’s Millennium Management and D E Shaw.
Because Radian Group Inc (NYSE:RDN) has witnessed falling interest from the aggregate hedge fund industry, we can see that there lies a certain “tier” of funds that elected to cut their full holdings in the third quarter. At the top of the heap, James H. Litinsky’s JHL Capital Group cut the largest position of all the hedgies monitored by Insider Monkey, comprising close to $9.3 million in stock, and Gunnar Overstrom’s Three Corner Global Investors was right behind this move, as the fund said goodbye to about $6.5 million worth of shares. These moves are interesting, as total hedge fund interest was cut by 3 funds in the third quarter.
Let’s now take a look at hedge fund activity in other stocks similar to Radian Group Inc (NYSE:RDN). We will take a look at Coherent, Inc. (NASDAQ:COHR), AMAYA INC (NASDAQ:AYA), Big Lots, Inc. (NYSE:BIG), and Cathay General Bancorp (NASDAQ:CATY). All of these stocks’ market caps are similar to RDN’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| COHR | 23 | 174462 | 1 |
| AYA | 18 | 713268 | 1 |
| BIG | 26 | 161909 | 0 |
| CATY | 12 | 38855 | 0 |
As you can see these stocks had an average of 19.75 hedge funds with bullish positions and the average amount invested in these stocks was $272 million. That figure was $379 million in RDN’s case. Big Lots, Inc. (NYSE:BIG) is the most popular stock in this table. On the other hand Cathay General Bancorp (NASDAQ:CATY) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Radian Group Inc (NYSE:RDN) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers and have more money invested in it, it may be a good idea to analyze it in detail and potentially include it in your portfolio, despite the quarterly dip in ownership.
Disclosure: None
