While the market driven by short-term sentiment influenced by the accommodative interest rate environment in the US, virus news and stimulus spending, many smart money investors are starting to get cautious towards the current bull run since March, 2020 and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding RingCentral Inc (NYSE:RNG).
Is RNG a good stock to buy? RingCentral Inc (NYSE:RNG) was in 51 hedge funds’ portfolios at the end of March. The all time high for this statistic is 67. RNG has seen a decrease in hedge fund sentiment recently. There were 63 hedge funds in our database with RNG holdings at the end of December. Our calculations also showed that RNG isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.
Donald Sussman of Paloma Partners
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation, which is why we are checking out this inflation play. We go through lists like 10 best gold stocks to buy to identify promising stocks. 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. Keeping this in mind let’s take a glance at the new hedge fund action regarding RingCentral Inc (NYSE:RNG).
Do Hedge Funds Think RNG Is A Good Stock To Buy Now?
At the end of March, a total of 51 of the hedge funds tracked by Insider Monkey were long this stock, a change of -19% from one quarter earlier. On the other hand, there were a total of 67 hedge funds with a bullish position in RNG a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
Among these funds, Tiger Global Management LLC held the most valuable stake in RingCentral Inc (NYSE:RNG), which was worth $990.9 million at the end of the fourth quarter. On the second spot was Alkeon Capital Management which amassed $933.7 million worth of shares. SCGE Management, Zevenbergen Capital Investments, and SQN Investors were 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 Jeneq Management allocated the biggest weight to RingCentral Inc (NYSE:RNG), around 5.73% of its 13F portfolio. Cota Capital is also relatively very bullish on the stock, earmarking 5.7 percent of its 13F equity portfolio to RNG.
Due to the fact that RingCentral Inc (NYSE:RNG) has faced bearish sentiment from the smart money, it’s safe to say that there lies a certain “tier” of fund managers that slashed their positions entirely last quarter. At the top of the heap, D. E. Shaw’s D E Shaw said goodbye to the biggest investment of all the hedgies tracked by Insider Monkey, worth an estimated $157.5 million in stock. Principal Global Investors’s fund, Columbus Circle Investors, also said goodbye to its stock, about $37.7 million worth. These transactions are important to note, as aggregate hedge fund interest fell by 12 funds last quarter.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as RingCentral Inc (NYSE:RNG) but similarly valued. We will take a look at Mettler-Toledo International Inc. (NYSE:MTD), Ferguson plc (NYSE:FERG), Dollar Tree, Inc. (NASDAQ:DLTR), Equity Residential (NYSE:EQR), Keysight Technologies Inc (NYSE:KEYS), Fifth Third Bancorp (NASDAQ:FITB), and Weyerhaeuser Co. (NYSE:WY). This group of stocks’ market caps match RNG’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MTD | 27 | 1040369 | -2 |
| FERG | 5 | 1642726 | 5 |
| DLTR | 41 | 1686679 | -12 |
| EQR | 23 | 359416 | -5 |
| KEYS | 32 | 529652 | 5 |
| FITB | 38 | 401275 | -5 |
| WY | 38 | 641353 | -2 |
| Average | 29.1 | 900210 | -2.3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 29.1 hedge funds with bullish positions and the average amount invested in these stocks was $900 million. That figure was $3250 million in RNG’s case. Dollar Tree, Inc. (NASDAQ:DLTR) is the most popular stock in this table. On the other hand Ferguson plc (NYSE:FERG) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks RingCentral Inc (NYSE:RNG) is more popular among hedge funds. Our overall hedge fund sentiment score for RNG is 65.8. 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. 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 17.4% in 2021 through June 18th and still beat the market by 6.1 percentage points. Unfortunately RNG wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on RNG were disappointed as the stock returned -3% since the end of the first quarter (through 6/18) 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 most of these stocks already outperformed the market since 2019.
Follow Ringcentral Inc. (NYSE:RNG)
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Disclosure: None. This article was originally published at Insider Monkey.
