Hedge funds don’t get the respect they used to get. Nowadays investors prefer passive funds over actively managed funds. One thing they don’t realize is that 100% of the passive funds didn’t see the coronavirus recession coming, but a lot of hedge funds did. Even we published an article near the end of February and predicted a US recession. Think about all the losses you could have avoided if you sold your shares in February and bought them back at the end of March. In this article we are going to analyze the hedge fund sentiment towards Realogy Holdings Corp (NYSE:RLGY) based on 4+ years of regulatory filings data.
Realogy Holdings Corp (NYSE:RLGY) was in 30 hedge funds’ portfolios at the end of the fourth quarter of 2019. RLGY has seen an increase in hedge fund sentiment in recent months. There were 25 hedge funds in our database with RLGY positions at the end of the previous quarter. Our calculations also showed that RLGY isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
To most market participants, hedge funds are viewed as unimportant, old financial tools of yesteryear. While there are greater than 8000 funds in operation at present, We look at the bigwigs of this group, about 850 funds. These money managers orchestrate the majority of the smart money’s total asset base, and by following their matchless equity investments, Insider Monkey has brought to light various investment strategies that have historically outstripped the market. Insider Monkey’s flagship short hedge fund strategy exceeded the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 35.3% since February 2017 (through March 3rd) even though the market was up more than 35% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
Mason Hawkins of Southeastern Asset Management
We leave no stone unturned when looking for the next great investment idea. For example, this investor can predict short term winners following earnings announcements with high accuracy, so we check out his stock picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to analyze the fresh hedge fund action surrounding Realogy Holdings Corp (NYSE:RLGY).
Hedge fund activity in Realogy Holdings Corp (NYSE:RLGY)
At the end of the fourth quarter, a total of 30 of the hedge funds tracked by Insider Monkey were long this stock, a change of 20% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in RLGY over the last 18 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).
More specifically, Southeastern Asset Management was the largest shareholder of Realogy Holdings Corp (NYSE:RLGY), with a stake worth $160.5 million reported as of the end of September. Trailing Southeastern Asset Management was Tremblant Capital, which amassed a stake valued at $93.2 million. Okumus Fund Management, Pzena Investment Management, and Arrowstreet Capital 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 Okumus Fund Management allocated the biggest weight to Realogy Holdings Corp (NYSE:RLGY), around 18.89% of its 13F portfolio. Prentice Capital Management is also relatively very bullish on the stock, earmarking 5.05 percent of its 13F equity portfolio to RLGY.
Now, specific money managers were breaking ground themselves. Moore Global Investments, managed by Louis Bacon, created the biggest position in Realogy Holdings Corp (NYSE:RLGY). Moore Global Investments had $18.9 million invested in the company at the end of the quarter. Michael Zimmerman’s Prentice Capital Management also made a $10.7 million investment in the stock during the quarter. The other funds with new positions in the stock are David Harding’s Winton Capital Management, Mark T. Gallogly’s Centerbridge Partners, and Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Realogy Holdings Corp (NYSE:RLGY) but similarly valued. We will take a look at Sculptor Capital Management, Inc. (NYSE:SCU), Delphi Technologies PLC (NYSE:DLPH), Callon Petroleum Company (NYSE:CPE), and Wesco Aircraft Holdings Inc (NYSE:WAIR). This group of stocks’ market valuations are closest to RLGY’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SCU | 12 | 85038 | 1 |
| DLPH | 17 | 155844 | -4 |
| CPE | 27 | 226348 | -2 |
| WAIR | 18 | 166223 | -7 |
| Average | 18.5 | 158363 | -3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.5 hedge funds with bullish positions and the average amount invested in these stocks was $158 million. That figure was $478 million in RLGY’s case. Callon Petroleum Company (NYSE:CPE) is the most popular stock in this table. On the other hand Sculptor Capital Management, Inc. (NYSE:SCU) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Realogy Holdings Corp (NYSE:RLGY) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 1.0% in 2020 through May 1st and still beat the market by 12.9 percentage points. Unfortunately RLGY wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on RLGY were disappointed as the stock returned -58.3% during the four months of 2020 (through May 1st) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
