What Does Hedge Fund Sentiment Say About ROI Acquisition Corp (ROIQ)?

Like everyone else, elite investors make mistakes. Some of their top consensus picks, such as Micron and Anadarko Petroleum, have not done well during the last 12 months ending in October due to various reasons. Nevertheless, the data show elite investors’ consensus picks have done well on average. The top 30 S&P 500 stocks among hedge funds at the end of September 2014 yielded an average return of 9.5% during the last four quarters ending in October and sixty three percent of these 30 stocks outperformed the market. S&P 500 Index returned only 5.2% during the same period and less than 49% of its constituents managed to beat this return. Because their consensus picks have done well, we pay attention to what elite funds think before doing extensive research on a stock. In this article, we take a closer look at ROI Acquisition Corp (NASDAQ:ROIQ) from the perspective of those elite funds.

Is ROI Acquisition Corp (NASDAQ:ROIQ) a buy right now? The number of long hedge fund bets in the company stayed the same during the third quarter, which is a slightly negative development in our experience. Overall, ROIQ was in 13 hedge funds’ portfolios at the end of the third quarter of 2015. At the end of this article we will also compare ROIQ to other stocks, including Salem Communications Corp (NASDAQ:SALM), Xcel Brands Inc (NASDAQ:XELB), and Emergent Capital Inc (NYSE:EMG) to get a better sense of its popularity.

According to most stock holders, hedge funds are assumed to be worthless, outdated financial tools of yesteryear. While there are greater than 8000 funds with their doors open at the moment, our experts look at the leaders of this club, around 700 funds. It is estimated that this group of investors shepherd most of the hedge fund industry’s total asset base, and by monitoring their top investments, Insider Monkey has brought to light a few investment strategies that have historically outrun the broader indices. Insider Monkey’s small-cap hedge fund strategy defeated the S&P 500 index by 12 percentage points per year for a decade in their back tests.

Keeping this in mind, we’re going to check out the key action regarding ROI Acquisition Corp (NASDAQ:ROIQ).

What have hedge funds been doing with ROI Acquisition Corp (NASDAQ:ROIQ)?

At the end of the third quarter, a total of 13 of the hedge funds tracked by Insider Monkey were long in this stock, flat on the quarter. With hedge funds’ capital changing hands, there exists a select group of notable hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Fir Tree, managed by Jeffrey Tannenbaum, holds the most valuable position in ROI Acquisition Corp (NASDAQ:ROIQ). Fir Tree has a $12.4 million position in the stock, comprising 0.2% of its 13F portfolio. Coming in second is Andrew Feldstein and Stephen Siderow of Blue Mountain Capital, with a $5 million position; 0.1% of its 13F portfolio is allocated to the company. Remaining peers that hold long positions encompass Glenn Russell Dubin’s Highbridge Capital Management, Sander Gerber’s Hudson Bay Capital Management and Israel Englander’s Millennium Management.

Judging by the fact that ROI Acquisition Corp (NASDAQ:ROIQ) has witnessed a declination in interest from the entirety of the hedge funds we track, it’s safe to say that there lies a certain “tier” of funds that slashed their entire stakes heading into Q4. It’s worth mentioning that Louis Bacon’s Moore Global Investments cut the largest investment of the “upper crust” of funds watched by Insider Monkey, totaling close to $5.6 million in stock, and Glenn Russell Dubin of Highbridge Capital Management was right behind this move, as the fund dropped about $5.2 million worth. These bearish behaviors are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s go over hedge fund activity in other stocks similar to ROI Acquisition Corp (NASDAQ:ROIQ). We will take a look at Salem Communications Corp (NASDAQ:SALM), Xcel Brands Inc (NASDAQ:XELB), Emergent Capital Inc (NYSE:EMG), and Gulf Island Fabrication, Inc. (NASDAQ:GIFI). This group of stocks’ market valuations are similar to ROIQ’s market valuation.

As you can see these stocks had an average of 8 hedge funds with bullish positions and the average amount invested in these stocks was $28 million. Moreover, the table indicates that hedge funds are the most bullish on Gulf Island Fabrication, Inc. (NASDAQ:GIFI), which was included in 13 equity portfolios at the end of September. ROI Acquisition Corp (NASDAQ:ROIQ) saw the same number of funds reporting stakes in the latest round of 13F filings, while the aggregate value of these stakes stood at $35 million. This suggests that ROIQ might make for a good investment at the moment, but, in any case, a more detailed analysis is required to better assess the company’s situation.