Hedge Funds Are Betting On The Rubicon Project Inc (RUBI)

Many investors, including Paul Tudor Jones or Stan Druckenmiller, have been saying before last year’s Q4 market crash that the stock market is overvalued due to a low interest rate environment that leads to companies swapping their equity for debt and focusing mostly on short-term performance such as beating the quarterly earnings estimates. In the first half of 2019, most investors recovered all of their Q4 losses as sentiment shifted and optimism dominated the US China trade negotiations. Nevertheless, many of the stocks that delivered strong returns in the first half still sport strong fundamentals and their gains were more related to the general market sentiment rather than their individual performance and hedge funds kept their bullish stance. In this article we will find out how hedge fund sentiment to The Rubicon Project Inc (NYSE:RUBI) changed recently.

The Rubicon Project Inc (NYSE:RUBI) was in 20 hedge funds’ portfolios at the end of the third quarter of 2019. RUBI investors should be aware of an increase in support from the world’s most elite money managers in recent months. There were 16 hedge funds in our database with RUBI holdings at the end of the previous quarter. Our calculations also showed that RUBI isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

To the average investor there are a lot of metrics stock traders use to grade stocks. A pair of the less utilized metrics are hedge fund and insider trading moves. Our experts have shown that, historically, those who follow the top picks of the best fund managers can outperform their index-focused peers by a very impressive margin (see the details here).

John Overdeck of Two Sigma

John Overdeck of Two Sigma Advisors

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. Let’s view the new hedge fund action regarding The Rubicon Project Inc (NYSE:RUBI).

How have hedgies been trading The Rubicon Project Inc (NYSE:RUBI)?

Heading into the fourth quarter of 2019, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 25% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards RUBI over the last 17 quarters. With hedge funds’ capital changing hands, there exists a select group of key hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).

Among these funds, Royce & Associates held the most valuable stake in The Rubicon Project Inc (NYSE:RUBI), which was worth $15.2 million at the end of the third quarter. On the second spot was Driehaus Capital which amassed $13.3 million worth of shares. Renaissance Technologies, Arrowstreet Capital, and Two Sigma Advisors were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position P.A.W. Capital Partners allocated the biggest weight to The Rubicon Project Inc (NYSE:RUBI), around 3.94% of its 13F portfolio. Manatuck Hill Partners is also relatively very bullish on the stock, designating 3.32 percent of its 13F equity portfolio to RUBI.

As industrywide interest jumped, key money managers have been driving this bullishness. PDT Partners, managed by Peter Muller, established the most valuable position in The Rubicon Project Inc (NYSE:RUBI). PDT Partners had $0.5 million invested in the company at the end of the quarter. Cliff Asness’s AQR Capital Management also initiated a $0.5 million position during the quarter. The other funds with new positions in the stock are Donald Sussman’s Paloma Partners, Brian C. Freckmann’s Lyon Street Capital, and Joel Greenblatt’s Gotham Asset Management.

Let’s check out hedge fund activity in other stocks similar to The Rubicon Project Inc (NYSE:RUBI). We will take a look at Bonanza Creek Energy Inc (NYSE:BCEI), Beazer Homes USA, Inc. (NYSE:BZH), Exterran Corporation (NYSE:EXTN), and OraSure Technologies, Inc. (NASDAQ:OSUR). All of these stocks’ market caps are closest to RUBI’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BCEI 21 144775 6
BZH 15 49612 8
EXTN 18 46058 4
OSUR 19 82277 2
Average 18.25 80681 5

View table here if you experience formatting issues.

As you can see these stocks had an average of 18.25 hedge funds with bullish positions and the average amount invested in these stocks was $81 million. That figure was $77 million in RUBI’s case. Bonanza Creek Energy Inc (NYSE:BCEI) is the most popular stock in this table. On the other hand Beazer Homes USA, Inc. (NYSE:BZH) is the least popular one with only 15 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately RUBI wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on RUBI were disappointed as the stock returned -7.2% during the fourth quarter (through the end of November) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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