Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don’t make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards Rave Restaurant Group, Inc. (NASDAQ:RAVE) to find out whether there were any major changes in hedge funds’ views.
Is RAVE a good stock to buy? The smart money was becoming more confident. The number of bullish hedge fund positions rose by 1 in recent months. Rave Restaurant Group, Inc. (NASDAQ:RAVE) was in 3 hedge funds’ portfolios at the end of March. The all time high for this statistic was previously 2. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that RAVE isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
David Siegel of Two Sigma Advisors
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund wants to buy this $28 biotech stock for $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With all of this in mind let’s take a look at the key hedge fund action surrounding Rave Restaurant Group, Inc. (NASDAQ:RAVE).
Do Hedge Funds Think RAVE Is A Good Stock To Buy Now?
At the end of the first quarter, a total of 3 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 50% from the fourth quarter of 2020. On the other hand, there were a total of 0 hedge funds with a bullish position in RAVE a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Renaissance Technologies was the largest shareholder of Rave Restaurant Group, Inc. (NASDAQ:RAVE), with a stake worth $0.8 million reported as of the end of March. Trailing Renaissance Technologies was Two Sigma Advisors, which amassed a stake valued at $0.1 million. 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 Renaissance Technologies allocated the biggest weight to Rave Restaurant Group, Inc. (NASDAQ:RAVE), around 0.0009% of its 13F portfolio. Two Sigma Advisors is also relatively very bullish on the stock, earmarking 0.0002 percent of its 13F equity portfolio to RAVE.
As industrywide interest jumped, key money managers have jumped into Rave Restaurant Group, Inc. (NASDAQ:RAVE) headfirst. Citadel Investment Group, managed by Ken Griffin, assembled the biggest position in Rave Restaurant Group, Inc. (NASDAQ:RAVE). Citadel Investment Group had $0 million invested in the company at the end of the quarter.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Rave Restaurant Group, Inc. (NASDAQ:RAVE) but similarly valued. These stocks are Rubicon Technology, Inc. (NASDAQ:RBCN), Ashford Inc. (NYSE:AINC), Chicago Rivet & Machine Co. (NYSE:CVR), China Liberal Education Holdings Limited (NASDAQ:CLEU), Aethlon Medical, Inc. (NASDAQ:AEMD), NanoVibronix, Inc. (NASDAQ:NAOV), and China Recycling Energy Corp. (NASDAQ:CREG). This group of stocks’ market valuations are closest to RAVE’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| RBCN | 3 | 4340 | 0 |
| AINC | 2 | 1024 | 0 |
| CVR | 2 | 1512 | 0 |
| CLEU | 1 | 120 | 1 |
| AEMD | 3 | 681 | 2 |
| NAOV | 3 | 479 | 0 |
| CREG | 2 | 200 | -1 |
| Average | 2.3 | 1194 | 0.3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 2.3 hedge funds with bullish positions and the average amount invested in these stocks was $1 million. That figure was $1 million in RAVE’s case. Rubicon Technology, Inc. (NASDAQ:RBCN) is the most popular stock in this table. On the other hand China Liberal Education Holdings Limited (NASDAQ:CLEU) is the least popular one with only 1 bullish hedge fund positions. Rave Restaurant Group, Inc. (NASDAQ:RAVE) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for RAVE is 86. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 17.2% in 2021 through June 11th and beat the market again by 3.3 percentage points. Unfortunately RAVE wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on RAVE were disappointed as the stock returned 0.7% since the end of March (through 6/11) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
Disclosure: None. This article was originally published at Insider Monkey.
