At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards RADA Electronic Industries Ltd. (NASDAQ:RADA).
Hedge fund interest in RADA Electronic Industries Ltd. (NASDAQ:RADA) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that RADA isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). At the end of this article we will also compare RADA to other stocks including GasLog Ltd (NYSE:GLOG), Citizens & Northern Corporation (NASDAQ:CZNC), and Uxin Limited (NASDAQ:UXIN) to get a better sense of its popularity.
Video: Watch our video about the top 5 most popular hedge fund stocks.
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 66 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.
Ken Griffin of Citadel Investment Group
At Insider Monkey we scour multiple sources to uncover 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 and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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 website. Now we’re going to check out the fresh hedge fund action encompassing RADA Electronic Industries Ltd. (NASDAQ:RADA).
What have hedge funds been doing with RADA Electronic Industries Ltd. (NASDAQ:RADA)?
Heading into the fourth quarter of 2020, a total of 7 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the previous quarter. On the other hand, there were a total of 2 hedge funds with a bullish position in RADA a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in RADA Electronic Industries Ltd. (NASDAQ:RADA) was held by G2 Investment Partners Management, which reported holding $7.1 million worth of stock at the end of September. It was followed by Noked Capital with a $6 million position. Other investors bullish on the company included Renaissance Technologies, Citadel Investment Group, and Two Sigma Advisors. In terms of the portfolio weights assigned to each position Noked Capital allocated the biggest weight to RADA Electronic Industries Ltd. (NASDAQ:RADA), around 3.98% of its 13F portfolio. G2 Investment Partners Management is also relatively very bullish on the stock, designating 1.71 percent of its 13F equity portfolio to RADA.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren’t any hedge funds dumping their holdings during the third quarter, there weren’t any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven’t identified any viable catalysts that can attract investor attention.
Let’s now review hedge fund activity in other stocks similar to RADA Electronic Industries Ltd. (NASDAQ:RADA). These stocks are GasLog Ltd (NYSE:GLOG), Citizens & Northern Corporation (NASDAQ:CZNC), Uxin Limited (NASDAQ:UXIN), Tellurian Inc. (NASDAQ:TELL), International Tower Hill Mines Ltd (NYSE:THM), Applied Optoelectronics Inc (NASDAQ:AAOI), and Graybug Vision, Inc. (NASDAQ:GRAY). This group of stocks’ market valuations are similar to RADA’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| GLOG | 7 | 6550 | -6 |
| CZNC | 4 | 3884 | 2 |
| UXIN | 5 | 2779 | 3 |
| TELL | 3 | 2596 | -1 |
| THM | 5 | 171654 | 1 |
| AAOI | 9 | 12567 | -3 |
| GRAY | 10 | 136937 | 10 |
| Average | 6.1 | 48138 | 0.9 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 6.1 hedge funds with bullish positions and the average amount invested in these stocks was $48 million. That figure was $17 million in RADA’s case. Graybug Vision, Inc. (NASDAQ:GRAY) is the most popular stock in this table. On the other hand Tellurian Inc. (NASDAQ:TELL) is the least popular one with only 3 bullish hedge fund positions. RADA Electronic Industries Ltd. (NASDAQ:RADA) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for RADA is 63.6. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 31.6% in 2020 through December 2nd and still beat the market by 16 percentage points. Hedge funds were also right about betting on RADA as the stock returned 30.7% since the end of Q3 (through 12/2) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Follow Rada Electronic Industries Ltd (NASDAQ:RADA)
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Disclosure: None. This article was originally published at Insider Monkey.
