There are several ways to beat the market, and investing in small cap stocks has historically been one of them. We like to improve the odds of beating the market further by examining what famous hedge fund operators such as Carl Icahn and George Soros think. Those hedge fund operators make billions of dollars each year by hiring the best and the brightest to do research on stocks, including small cap stocks that big brokerage houses simply don’t cover. Because of Carl Icahn and other elite funds’ exemplary historical records, we pay attention to their small cap picks. In this article, we use hedge fund filing data to analyze RealNetworks Inc (NASDAQ:RNWK).
Is RealNetworks Inc (NASDAQ:RNWK) ready to rally soon? The smart money is getting less optimistic. The number of bullish hedge fund positions fell by 3 in recent months. RealNetworks Inc (NASDAQ:RNWK) was in 8 hedge funds’ portfolios at the end of the third quarter of 2015. There were 11 hedge funds in our database with RealNetworks Inc (NASDAQ:RNWK) holdings at the end of the previous quarter. One may not be surprised with the hedge fund sentiment considering that the shares of the company lost 24.4% value during the same quarter. In order to understand the hedge fund sentiment better, let us find out about the hedge funds that had RealNetworks Inc (NASDAQ:RNWK) in their portfolio, at the end of September.
The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity, but it may still be less popular than similarly priced stocks. That’s why at the end of this article, we will examine companies such as ESSA Bancorp, Inc. (NASDAQ:ESSA), United Online, Inc. (NASDAQ:UNTD), and Contango Oil & Gas Company (NYSEMKT:MCF) to gather more data points.
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According to most market participants, hedge funds are perceived as unimportant, outdated investment tools of yesteryear. While there are more than 8000 funds trading at present, we choose to focus on the moguls of this group, around 700 funds. These investment experts direct the lion’s share of all hedge funds’ total asset base, and by watching their unrivaled investments, Insider Monkey has spotted a number of investment strategies that have historically outrun Mr. Market. Insider Monkey’s small-cap hedge fund strategy exceeded the S&P 500 index by 12 percentage points a year for a decade in their back tests.
Keeping this in mind, we’re going to analyze the fresh action surrounding RealNetworks Inc (NASDAQ:RNWK).
What does the smart money think about RealNetworks Inc (NASDAQ:RNWK)?
Heading into Q4, a total of 8 of the hedge funds tracked by Insider Monkey were long this stock, a decline of 27% from the second quarter. With hedgies’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Park West Asset Management, managed by Peter S. Park, holds the biggest position in RealNetworks Inc (NASDAQ:RNWK). Park West Asset Management has a $7.4 million position in the stock, comprising 0.7% of its 13F portfolio. On Park West Asset Management’s heels is Renaissance Technologies, which holds a $4.3 million position; less than 0.1% of its 13F portfolio is allocated to the stock. Other professional money managers that are bullish comprise Chuck Royce’s Royce & Associates, Millennium Management Subsidiary’s Green Arrow Capital Management, and John Fichthorn’s Dialectic Capital Management.
Seeing as RealNetworks Inc (NASDAQ:RNWK) has faced a declination in interest from the aggregate hedge fund industry, we can see that there were a few funds that slashed their entire stakes heading into Q4. It’s worth mentioning that Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital said goodbye to the biggest investment of the “upper crust” of funds watched by Insider Monkey, comprising about $0.4 million in stock. Matthew Hulsizer’s fund, PEAK6 Capital Management, also cut its stock, about $0.3 million worth of shares. These bearish behaviors are important to note, as total hedge fund interest was cut by 3 funds heading into Q4.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as RealNetworks Inc (NASDAQ:RNWK) but similarly valued. These stocks are ESSA Bancorp, Inc. (NASDAQ:ESSA), United Online, Inc. (NASDAQ:UNTD), Contango Oil & Gas Company (NYSEMKT:MCF), and Enzo Biochem, Inc. (NYSE:ENZ). This group of stocks’ market caps match RealNetworks Inc (NASDAQ:RNWK)’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ESSA | 5 | 8959 | 1 |
| UNTD | 16 | 29783 | -2 |
| MCF | 11 | 56975 | -3 |
| ENZ | 10 | 7486 | -1 |
As you can see, these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $26 million. That figure was $37 million in RealNetworks Inc (NASDAQ:RNWK)’s case. United Online, Inc. (NASDAQ:UNTD) is the most popular stock in this table. On the other hand, ESSA Bancorp, Inc. (NASDAQ:ESSA) is the least popular one with only 5 bullish hedge fund positions. RealNetworks Inc (NASDAQ:RNWK) is not the least popular stock in this group, but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard, United Online, Inc. (NASDAQ:UNTD) might be a better candidate to consider a long position.
