Hedge Funds Are Buying RingCentral Inc (RNG)

Many investors, including Carl Icahn or Stan Druckenmiller, have been saying for a while now that the current 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 third quarter, many investors lost money due to unpredictable events such as the concerns over Valeant’s drug pricing policy that led to an overall drop among pharma stocks. Nevertheless, many of the stocks that tanked in the third quarter still sport strong fundamentals and their decline was 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 RingCentral Inc (NYSE:RNG) changed recently.

RingCentral shareholders have witnessed an increase in activity from the world’s largest hedge funds recently. RNG was in 29 hedge funds’ portfolios at the end of September. There were 22 hedge funds in our database with RNG holdings at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Amedisys Inc (NASDAQ:AMED), Alon USA Energy, Inc. (NYSE:ALJ), and World Wrestling Entertainment, Inc. (NYSE:WWE) to gather more data points.

In the financial world, there are many methods stock traders use to value their stock investments. Two of the most under-the-radar methods are hedge fund and insider trading moves. Our experts have shown that, historically, those who follow the top picks of the top money managers can outpace the S&P 500 by a superb margin (see the details here).

Keeping this in mind, let’s review the latest action surrounding RingCentral Inc (NYSE:RNG).

What have hedge funds been doing with RingCentral Inc (NYSE:RNG)?

At the end of the third quarter, a total of 29 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 32% from the previous quarter. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Brookside Capital, managed by Bain Capital, holds the number one position in RingCentral Inc (NYSE:RNG). Brookside Capital has a $42 million position in the stock, comprising 1.3% of its 13F portfolio. The second most bullish fund manager is Columbus Circle Investors, managed by Clifford Fox, which holds a $27.5 million position; the fund has 0.2% of its 13F portfolio invested in the stock. The remaining members of the smart money that are bullish comprise James Crichton’s Hitchwood Capital Management and Jim Simons’ Renaissance Technologies.

Now, some big names were breaking ground themselves. Crosslink Capital, managed by Seymour Sy Kaufman and Michael Stark, initiated the largest position in RingCentral Inc (NYSE:RNG). Crosslink Capital had $11.9 million invested in the company at the end of the quarter. Paul Hondros’s AlphaOne Capital Partners also made a $5.3 million investment in the stock during the quarter. The other funds with new positions in the stock are Jim Tarantino and Chris Galvin’s Westerly Capital Management, Josh Goldberg’s G2 Investment Partners Management, and Glenn Russell Dubin’s Highbridge Capital Management.

Let’s now review hedge fund activity in other stocks similar to RingCentral Inc (NYSE:RNG). We will take a look at Amedisys Inc (NASDAQ:AMED), Alon USA Energy, Inc. (NYSE:ALJ), World Wrestling Entertainment, Inc. (NYSE:WWE), and EP Energy Corp (NYSE:EPE). This group of stocks’ market values are similar to RNG’s market value.

As you can see these stocks had an average of 22 hedge funds with bullish positions and the average amount invested in these stocks was $145 million, compared to the $194 million figure in RNG’s case. Amedisys Inc (NASDAQ:AMED) is the most popular stock in this table with 24 funds owning shares, while EP Energy Corp (NYSE:EPE) is the least popular one. Compared to these stocks, RingCentral Inc (NYSE:RNG) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.