The financial regulations require hedge funds and wealthy investors that exceeded the $100 million holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on June 30th. We at Insider Monkey have made an extensive database of more than 873 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded Rambus Inc. (NASDAQ:RMBS) based on those filings.
Is Rambus Inc. (NASDAQ:RMBS) a safe investment right now? The smart money was becoming less hopeful. The number of long hedge fund bets decreased by 3 lately. Rambus Inc. (NASDAQ:RMBS) was in 20 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 24. Our calculations also showed that RMBS isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 23 hedge funds in our database with RMBS holdings at the end of March.
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. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 79 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
David E. Shaw of D.E. Shaw
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, plant based food market is expected to explode 100-fold by 2050, so we are checking out this under-the-radar stock. We go through lists like the 10 best growth stocks to buy 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. Keeping this in mind we’re going to analyze the fresh hedge fund action encompassing Rambus Inc. (NASDAQ:RMBS).
Do Hedge Funds Think RMBS Is A Good Stock To Buy Now?
At Q2’s end, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -13% from the first quarter of 2020. The graph below displays the number of hedge funds with bullish position in RMBS over the last 24 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Lynrock Lake, managed by Cynthia Paul, holds the biggest position in Rambus Inc. (NASDAQ:RMBS). Lynrock Lake has a $181.8 million position in the stock, comprising 12.5% of its 13F portfolio. On Lynrock Lake’s heels is D E Shaw, managed by D. E. Shaw, which holds a $32.7 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining peers with similar optimism include Cynthia Paul’s Lynrock Lake, Renaissance Technologies and Spencer M. Waxman’s Shannon River Fund Management. In terms of the portfolio weights assigned to each position Lynrock Lake allocated the biggest weight to Rambus Inc. (NASDAQ:RMBS), around 12.51% of its 13F portfolio. Barington Capital Group is also relatively very bullish on the stock, earmarking 11.72 percent of its 13F equity portfolio to RMBS.
Seeing as Rambus Inc. (NASDAQ:RMBS) has faced declining sentiment from the aggregate hedge fund industry, it’s safe to say that there was a specific group of hedge funds that decided to sell off their full holdings by the end of the second quarter. At the top of the heap, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital dumped the largest investment of the “upper crust” of funds tracked by Insider Monkey, totaling close to $20.8 million in stock. Xiuping Li’s fund, Opti Capital Management, also cut its stock, about $16.2 million worth. These transactions are interesting, as aggregate hedge fund interest was cut by 3 funds by the end of the second quarter.
Let’s check out hedge fund activity in other stocks similar to Rambus Inc. (NASDAQ:RMBS). We will take a look at IGM Biosciences, Inc. (NASDAQ:IGMS), Vista Outdoor Inc (NYSE:VSTO), Perficient, Inc. (NASDAQ:PRFT), NovaGold Resources Inc. (NYSE:NG), Minerals Technologies Inc (NYSE:MTX), Constellium SE (NYSE:CSTM), and Allegheny Technologies Incorporated (NYSE:ATI). This group of stocks’ market valuations resemble RMBS’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| IGMS | 13 | 739582 | -5 |
| VSTO | 24 | 408981 | 2 |
| PRFT | 18 | 108591 | -4 |
| NG | 18 | 292068 | 3 |
| MTX | 10 | 101131 | 1 |
| CSTM | 28 | 365340 | -8 |
| ATI | 28 | 269671 | 8 |
| Average | 19.9 | 326481 | -0.4 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.9 hedge funds with bullish positions and the average amount invested in these stocks was $326 million. That figure was $382 million in RMBS’s case. Constellium SE (NYSE:CSTM) is the most popular stock in this table. On the other hand Minerals Technologies Inc (NYSE:MTX) is the least popular one with only 10 bullish hedge fund positions. Rambus Inc. (NASDAQ:RMBS) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for RMBS is 54.8. 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. 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 24% in 2021 through October 22nd and beat the market again by 1.6 percentage points. Unfortunately RMBS wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on RMBS were disappointed as the stock returned -4% since the end of June (through 10/22) 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.
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Disclosure: None. This article was originally published at Insider Monkey.
