Do Hedge Funds Love Rapid7 Inc (RPD)?

Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 900 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about Rapid7 Inc (NASDAQ:RPD) in this article.

Rapid7 Inc (NASDAQ:RPD) has seen an increase in activity from the world’s largest hedge funds lately. Rapid7 Inc (NASDAQ:RPD) was in 25 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 28. There were 21 hedge funds in our database with RPD holdings at the end of December. Our calculations also showed that RPD isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

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 monthly stock picks returned 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

John Overdeck of Two Sigma

John Overdeck of Two Sigma Advisors

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, economists warn of inflation flare up. So, we are checking out this backdoor gold play that has hit peak gains of 718% in a little over a year. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Now let’s take a peek at the key hedge fund action surrounding Rapid7 Inc (NASDAQ:RPD).

Do Hedge Funds Think RPD Is A Good Stock To Buy Now?

At the end of March, a total of 25 of the hedge funds tracked by Insider Monkey were long this stock, a change of 19% from the fourth quarter of 2020. The graph below displays the number of hedge funds with bullish position in RPD over the last 23 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Rapid7 Inc (NASDAQ:RPD) was held by Washington Harbour Partners, which reported holding $25.6 million worth of stock at the end of December. It was followed by Two Sigma Advisors with a $24.1 million position. Other investors bullish on the company included Balyasny Asset Management, Arrowstreet Capital, and Millennium Management. In terms of the portfolio weights assigned to each position Washington Harbour Partners allocated the biggest weight to Rapid7 Inc (NASDAQ:RPD), around 4.29% of its 13F portfolio. Aequim Alternative Investments is also relatively very bullish on the stock, setting aside 0.46 percent of its 13F equity portfolio to RPD.

With a general bullishness amongst the heavyweights, key hedge funds were breaking ground themselves. Balyasny Asset Management, managed by Dmitry Balyasny, assembled the biggest position in Rapid7 Inc (NASDAQ:RPD). Balyasny Asset Management had $20.6 million invested in the company at the end of the quarter. Robert Henry Lynch’s Aristeia Capital also made a $3.6 million investment in the stock during the quarter. The following funds were also among the new RPD investors: Karim Abbadi and Edward McBride’s Centiva Capital, Renaissance Technologies, and Sander Gerber’s Hudson Bay Capital Management.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Rapid7 Inc (NASDAQ:RPD) but similarly valued. These stocks are Switch, Inc. (NYSE:SWCH), Carter’s, Inc. (NYSE:CRI), Hayward Holdings, Inc. (NYSE:HAYW), Envestnet Inc (NYSE:ENV), Tilray, Inc. (NASDAQ:TLRY), Murphy USA Inc. (NYSE:MUSA), and SeaWorld Entertainment Inc (NYSE:SEAS). All of these stocks’ market caps are similar to RPD’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SWCH 10 187483 -8
CRI 27 265128 2
HAYW 25 209769 25
ENV 18 210832 -10
TLRY 21 257933 4
MUSA 19 264778 -7
SEAS 39 1881920 6
Average 22.7 468263 1.7

View table here if you experience formatting issues.

As you can see these stocks had an average of 22.7 hedge funds with bullish positions and the average amount invested in these stocks was $468 million. That figure was $152 million in RPD’s case. SeaWorld Entertainment Inc (NYSE:SEAS) is the most popular stock in this table. On the other hand Switch, Inc. (NYSE:SWCH) is the least popular one with only 10 bullish hedge fund positions. Rapid7 Inc (NASDAQ:RPD) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for RPD is 61.6. 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. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through July 9th and still beat the market by 6.7 percentage points. Hedge funds were also right about betting on RPD as the stock returned 37.8% since the end of Q1 (through 7/9) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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