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Did Hedge Funds Drop The Ball On Rubicon Project, Inc. (RUBI) ?

Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of the Rubicon Project, Inc. (NYSE:RUBI).

the Rubicon Project, Inc. (NYSE:RUBI) investors should be aware of a decrease in activity from the world’s largest hedge funds recently. Our calculations also showed that RUBI isn’t among the 30 most popular stocks among hedge funds (see the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Philip Hempleman Ardsley Partners

In addition to following the biggest hedge funds for investment ideas, we also share stock pitches from conferences, investor letters and other sources  like this one where the fund manager is talking about two under the radar 1000% return potential stocks: first one in internet infrastructure and the second in the heart of advertising market. We use hedge fund buy/sell signals to determine whether to conduct in-depth analysis of these stock ideas which take days. Let’s check out the latest hedge fund action encompassing the Rubicon Project, Inc. (NYSE:RUBI).

What have hedge funds been doing with the Rubicon Project, Inc. (NYSE:RUBI)?

At Q2’s end, a total of 16 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -36% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards RUBI over the last 16 quarters. With hedgies’ sentiment swirling, there exists a select group of key hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).

RUBI_oct2019

Among these funds, Royce & Associates held the most valuable stake in the Rubicon Project, Inc. (NYSE:RUBI), which was worth $11.5 million at the end of the second quarter. On the second spot was Renaissance Technologies which amassed $9.3 million worth of shares. Moreover, Driehaus Capital, Two Sigma Advisors, and D E Shaw were also bullish on the Rubicon Project, Inc. (NYSE:RUBI), allocating a large percentage of their portfolios to this stock.

Due to the fact that the Rubicon Project, Inc. (NYSE:RUBI) has experienced falling interest from hedge fund managers, it’s safe to say that there is a sect of hedgies that slashed their full holdings heading into Q3. At the top of the heap, Raymond J. Harbert’s Harbert Management dumped the biggest stake of the 750 funds watched by Insider Monkey, totaling an estimated $4.7 million in stock. Jim Roumell’s fund, Roumell Asset Management, also sold off its stock, about $2.5 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest was cut by 9 funds heading into Q3.

Let’s go over hedge fund activity in other stocks similar to the Rubicon Project, Inc. (NYSE:RUBI). We will take a look at Accuray Incorporated (NASDAQ:ARAY), Avedro, Inc. (NASDAQ:AVDR), Lawson Products, Inc. (NASDAQ:LAWS), and Summit Financial Group, Inc. (NASDAQ:SMMF). This group of stocks’ market valuations resemble RUBI’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ARAY 17 70095 2
AVDR 8 102003 -5
LAWS 5 15089 1
SMMF 2 8578 0
Average 8 48941 -0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 8 hedge funds with bullish positions and the average amount invested in these stocks was $49 million. That figure was $52 million in RUBI’s case. Accuray Incorporated (NASDAQ:ARAY) is the most popular stock in this table. On the other hand Summit Financial Group, Inc. (NASDAQ:SMMF) is the least popular one with only 2 bullish hedge fund positions. The Rubicon Project Inc (NYSE:RUBI) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Hedge funds were also right about betting on RUBI as the stock returned 36.9% during the third quarter and outperformed the market. Hedge funds were rewarded for their relative bullishness.

Disclosure: None. This article was originally published at Insider Monkey.

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