Is Rackspace Hosting, Inc. (RAX) A Good Stock To Buy?

Due to the fact that Rackspace Hosting, Inc. (NYSE:RAX) has experienced bearish sentiment from the aggregate hedge fund industry, we can see that there is a sect of hedgies who were dropping their positions entirely by the end of the third quarter. At the top of the heap, Steve Cohen’s Point72 Asset Management dropped the largest position of the “upper crust” of funds watched by Insider Monkey, worth an estimated $21.6 million in call options.. Matthew Mark’s fund, Jet Capital Investors, also sold off its call options., about $18.6 million worth. These bearish behaviors are important to note, as total hedge fund interest was cut by 7 funds by the end of the third quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Rackspace Hosting, Inc. (NYSE:RAX) but similarly valued. We will take a look at Blue Buffalo Pet Products Inc (NASDAQ:BUFF), HEALTHSOUTH Corp. (NYSE:HLS), DealerTrack Technologies Inc (NASDAQ:TRAK), and Trinity Industries, Inc. (NYSE:TRN). This group of stocks’ market values match RAX’s market value.

As you can see these stocks had an average of 25.25 hedge funds with bullish positions and the average amount invested in these stocks was $380 million. That figure was $614 million in RAX’s case. DealerTrack Technologies Inc (NASDAQ:TRAK) is the most popular stock in this table. On the other hand HEALTHSOUTH Corp. (NYSE:HLS) is the least popular one with only 22 bullish hedge fund positions. Rackspace Hosting, Inc. (NYSE:RAX) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard TRAK might be a better candidate to consider a long position.