The equity market returns were very disappointing in the third quarter, “thanks” to the slowdown of China’s economy and the weaker-than-expected U.S. economic data. It was not entirely clear whether the broader market sell-off made U.S. equity valuations undervalued, but it definitely made them more attractive. It is worth mentioning that Russell 2000 ETF (IWM) underperformed the broad-market S&P 500 ETF by more than 14 percentage points during the period of June 25, 2015 through October 30, 2015. This clearly points to the fact that most investors, including hedge fund firms and institutional investors, heavily cut their exposure to high-potential (but seemingly riskier) small-cap stocks during the bloody third quarter. So let’s take a glance at the smart money sentiment towards RSP Permian Inc (NYSE:RSPP) and see how it was affected.
Is RSP Permian Inc (NYSE:RSPP) a good investment today? Our calculations show that hedge funds are getting slightly more optimistic. The number of bullish hedge fund bets moved up by 1 lately. At the end of this article we will also compare RSPP to other stocks including West Corp (NASDAQ:WSTC), OM Asset Management PLC (NYSE:OMAM), and South State Corporation (NASDAQ:SSB) to get a better sense of its popularity.
Follow Rsp Permian Inc. (NYSE:RSPP)
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According to most market participants, hedge funds are seen as worthless, old financial vehicles of years past. While there are more than an 8000 funds with their doors open at present, We choose to focus on the upper echelon of this club, about 700 funds. These hedge fund managers orchestrate most of all hedge funds’ total asset base, and by keeping an eye on their best picks, Insider Monkey has spotted a number of investment strategies that have historically outpaced the S&P 500 index. Insider Monkey’s small-cap hedge fund strategy surpassed the S&P 500 index by 12 percentage points per year for a decade in their back tests.
Keeping this in mind, let’s take a gander at the key action encompassing RSP Permian Inc (NYSE:RSPP).
What have hedge funds been doing with RSP Permian Inc (NYSE:RSPP)?
At the end of the third quarter, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a change of 5% from the previous quarter. With hedge funds’ capital changing hands, there exists a select group of notable hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, John Labanowski’s Brenham Capital Management has the biggest position in RSP Permian Inc (NYSE:RSPP), worth close to $60.8 million, corresponding to 13.1% of its total 13F portfolio. Sitting at the No. 2 spot is Citadel Investment Group, led by Ken Griffin, holding a $59.4 million position; 0.1% of its 13F portfolio is allocated to the stock. Other peers that hold long positions include Vince Maddi and Shawn Brennan’s SIR Capital Management, Marc Lisker, Glenn Fuhrman and John Phelan’s MSDC Management and David Zusman’s Talara Capital Management.
As one would reasonably expect, specific money managers were breaking ground themselves. Point72 Asset Management, managed by Steve Cohen, initiated the biggest position in RSP Permian Inc (NYSE:RSPP). Point72 Asset Management had $2.6 million invested in the company at the end of the quarter. Robert Vollero and Gentry T. Beach’s Vollero Beach Capital Partners also made a $2.6 million investment in the stock during the quarter. The other funds with brand new RSPP positions are Lawrence Sapanski’s Scoria Capital, Mike Vranos’s Ellington, and Benjamin A. Smith’s Laurion Capital Management.
Let’s also examine hedge fund activity in other stocks similar to RSP Permian Inc (NYSE:RSPP). These stocks are West Corp (NASDAQ:WSTC), OM Asset Management PLC (NYSE:OMAM), South State Corporation (NASDAQ:SSB), and Science Applications International Corp (NYSE:SAIC). All of these stocks’ market caps match RSPP’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| WSTC | 16 | 73353 | -7 |
| OMAM | 13 | 99404 | -1 |
| SSB | 12 | 78091 | 3 |
| SAIC | 20 | 125846 | 2 |
As you can see these stocks had an average of 15.25 hedge funds with bullish positions and the average amount invested in these stocks was $94 million. That figure was $208 million in RSPP’s case. Science Applications International Corp (NYSE:SAIC) is the most popular stock in this table. On the other hand South State Corporation (NASDAQ:SSB) is the least popular one with only 12 bullish hedge fund positions. RSP Permian Inc (NYSE:RSPP) 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 SAIC might be a better candidate to consider a long position.
