In this article we will take a look at whether hedge funds think Radcom Ltd. (NASDAQ:RDCM) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Hedge fund interest in Radcom Ltd. (NASDAQ:RDCM) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that RDCM 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 RDCM to other stocks including Evolus, Inc. (NASDAQ:EOLS), Actinium Pharmaceuticals Inc (NYSE:ATNM), and Minerva Neurosciences, Inc (NASDAQ:NERV) 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.
William Martin of Raging Capital Management
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 10 most profitable companies in the world 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. With all of this in mind we’re going to review the recent hedge fund action encompassing Radcom Ltd. (NASDAQ:RDCM).
How are hedge funds trading Radcom Ltd. (NASDAQ:RDCM)?
Heading into the fourth quarter of 2020, a total of 4 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 4 hedge funds with a bullish position in RDCM a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Josh Goldberg’s G2 Investment Partners Management has the number one position in Radcom Ltd. (NASDAQ:RDCM), worth close to $4.2 million, corresponding to 1% of its total 13F portfolio. On G2 Investment Partners Management’s heels is Richard Mashaal of Rima Senvest Management, with a $2.2 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors that hold long positions contain Jim Simons (founder)’s Renaissance Technologies, William C. Martin’s Raging Capital Management and . In terms of the portfolio weights assigned to each position Raging Capital Management allocated the biggest weight to Radcom Ltd. (NASDAQ:RDCM), around 1.3% of its 13F portfolio. G2 Investment Partners Management is also relatively very bullish on the stock, earmarking 1.02 percent of its 13F equity portfolio to RDCM.
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 Radcom Ltd. (NASDAQ:RDCM). We will take a look at Evolus, Inc. (NASDAQ:EOLS), Actinium Pharmaceuticals Inc (NYSE:ATNM), Minerva Neurosciences, Inc (NASDAQ:NERV), Genprex, Inc. (NASDAQ:GNPX), AgEagle Aerial Systems, Inc. (NYSE:UAVS), Atento SA (NYSE:ATTO), and Intevac, Inc. (NASDAQ:IVAC). This group of stocks’ market values are closest to RDCM’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| EOLS | 10 | 2356 | 1 |
| ATNM | 6 | 10618 | -1 |
| NERV | 15 | 11835 | 1 |
| GNPX | 2 | 311 | -1 |
| UAVS | 3 | 370 | 2 |
| ATTO | 5 | 13150 | -1 |
| IVAC | 6 | 15293 | 0 |
| Average | 6.7 | 7705 | 0.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 6.7 hedge funds with bullish positions and the average amount invested in these stocks was $8 million. That figure was $10 million in RDCM’s case. Minerva Neurosciences, Inc (NASDAQ:NERV) is the most popular stock in this table. On the other hand Genprex, Inc. (NASDAQ:GNPX) is the least popular one with only 2 bullish hedge fund positions. Radcom Ltd. (NASDAQ:RDCM) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for RDCM is 36.7. 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 negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 30.7% in 2020 through November 27th and surpassed the market again by 16.1 percentage points. Unfortunately RDCM wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); RDCM investors were disappointed as the stock returned -1.1% since the end of September (through 11/27) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.
