Is Rightside Group Ltd (NAME) A Good Stock To Buy?

Based on the fact that hedge funds have collectively under-performed the market for several years, it would be easy to assume that their stock picks simply aren’t very good. However, our research shows this not to be the case. In fact, when it comes to their very top picks collectively, they show a strong ability to pick winning stocks. Between November 1, 2014 and October 30 of this year, less than 49% of the stocks in the S&P 500 beat the market. However, hedge funds’ top 30 stock picks from the index had a much higher success rate than this, at 63%. The returns from these 30 stocks also easily bested the broader market, at 9.5% compared to 5.2%, despite there being a few duds in there like Micron and Anadarko (even their collective wisdom isn’t perfect). The results show that there is plenty of merit to imitating the collective wisdom of top investors.

Rightside Group Ltd (NASDAQ:NAME) investors should pay attention to a decrease in hedge fund sentiment recently. NAME was in 7 hedge funds’ portfolios at the end of the third quarter of 2015. There were 8 hedge funds in our database with NAME holdings at the end of the previous quarter. 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 Dipexium Pharmaceuticals Inc (NASDAQ:DPRX), Electro Scientific Industries, Inc. (NASDAQ:ESIO), and Daqo New Energy Corp (NYSE:DQ) to gather more data points.

In the financial world there are tons of tools shareholders have at their disposal to evaluate their stock investments. A pair of the most useful tools are hedge fund and insider trading signals. We have shown that, historically, those who follow the best picks of the top fund managers can beat the broader indices by a solid margin (see the details here).

Now, let’s go over the key action regarding Rightside Group Ltd (NASDAQ:NAME).

Hedge fund activity in Rightside Group Ltd (NASDAQ:NAME)

At the end of the third quarter, a total of 7 of the hedge funds tracked by Insider Monkey were long this stock, a change of -13% from the previous quarter. With hedge funds’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, J. Carlo Cannell’s Cannell Capital has the largest position in Rightside Group Ltd (NASDAQ:NAME), worth close to $4 million, amounting to 1.5% of its total 13F portfolio. The second most bullish fund manager is Renaissance Technologies, holding a $2.4 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other members of the smart money that are bullish comprise Paul Solit’s Potomac Capital Management, D. E. Shaw’s D E Shaw and Ken Griffin’s Citadel Investment Group.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: MFP Investors. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because none of the 700+ hedge funds tracked by Insider Monkey identified NAME as a viable investment and initiated a position in the stock.

Let’s go over hedge fund activity in other stocks similar to Rightside Group Ltd (NASDAQ:NAME). We will take a look at Dipexium Pharmaceuticals Inc (NASDAQ:DPRX), Electro Scientific Industries, Inc. (NASDAQ:ESIO), Daqo New Energy Corp (NYSE:DQ), and Core Molding Technologies, Inc. (NYSEMKT:CMT). All of these stocks’ market caps are closest to NAME’s market cap.

As you can see these stocks had an average of 7 hedge funds with bullish positions and the average amount invested in these stocks was $24 million, compared to $11 million in NAME’s case. Electro Scientific Industries, Inc. (NASDAQ:ESIO) is the most popular stock in this table. On the other hand Daqo New Energy Corp (NYSE:DQ) is the least popular one with only 4 bullish hedge fund positions. Rightside Group Ltd (NASDAQ:NAME) 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. In this regard ESIO might be a better candidate to consider a long position.