Investing in hedge funds can bring large profits, but it’s not for everybody, since hedge funds are available only for high-net-worth individuals. They generate significant returns for investors to justify their large fees and they allocate a lot of time and employ a complex analysis to determine the best stocks to invest in. A particularly interesting group of stocks that hedge funds like is the small-caps. The huge amount of capital does not allow hedge funds to invest a lot in small-caps, but our research showed that their most popular small-cap ideas are less efficiently priced and generate stronger returns than their large- and mega-cap picks and the broader market. That is why we follow the hedge fund activity in the small-cap space.
One of the stocks that experienced an increase in support from smart money investors is Rice Energy Inc (NYSE:RICE), in which 43 funds from our database held shares at the end of September, versus 38 funds at the end of June. However, the level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as NCR Corporation (NYSE:NCR), WEX Inc (NYSE:WEX), and Corelogic Inc (NYSE:CLGX) to gather more data points.
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At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
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Keeping this in mind, let’s review the new action surrounding Rice Energy Inc (NYSE:RICE).
What does the smart money think about Rice Energy Inc (NYSE:RICE)?
At the end of September, 43 funds tracked by Insider Monkey were long Rice Energy, which represents an increase of 13% from the end of the second quarter. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Andreas Halvorsen’s Viking Global has the largest position in Rice Energy Inc (NYSE:RICE), worth close to $390.9 million, amounting to 1.7% of its total 13F portfolio. The second largest stake is held by Steadfast Capital Management, led by Robert Pitts, which disclosed a $108.5 million position; 1.9% of its 13F portfolio is allocated to the company. Remaining members of the smart money that are bullish include John Burbank’s Passport Capital, Ryan Heslop and Ariel Warszawski’s Firefly Value Partners, and Steve Cohen’s Point72 Asset Management.
Consequently, key hedge funds have been driving this bullishness. John Labanowski’s Brenham Capital Management, established the most outsized position in Rice Energy Inc (NYSE:RICE). Brenham Capital Management had $60.1 million invested in the company at the end of the quarter. Jim Simons’ Renaissance Technologies also initiated a $24.5 million position during the quarter. The other funds with new positions in the stock are Robert Pohly’s Samlyn Capital, Alec Litowitz and Ross Laser’s Magnetar Capital, and Leon Cooperman’s Omega Advisors.
Let’s now review hedge fund activity in other stocks similar to Rice Energy Inc (NYSE:RICE). We will take a look at NCR Corporation (NYSE:NCR), WEX Inc (NYSE:WEX), Corelogic Inc (NYSE:CLGX), and Cabelas Inc (NYSE:CAB). This group of stocks’ market caps match RICE’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NCR | 27 | 245444 | 5 |
| WEX | 10 | 171447 | -1 |
| CLGX | 19 | 387224 | -3 |
| CAB | 34 | 961197 | 7 |
As you can see these stocks had an average of 23 funds with bullish positions and the average amount invested in these stocks was $441 million. That figure was $1.22 billion in RICE’s case. Cabelas Inc (NYSE:CAB) is the most popular stock in this table, while WEX Inc (NYSE:WEX) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks, Rice Energy Inc (NYSE:RICE) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
