Hedge Funds Are Dumping Rentrak Corporation (RENT)

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 Rentrak Corporation (NASDAQ:RENT) and see how it was affected.

Rentrak Corporation (NASDAQ:RENT) was in 14 hedge funds’ portfolios at the end of the third quarter of 2015. RENT has experienced a decrease in hedge fund interest in recent months. There were 17 hedge funds in our database with RENT positions at the end of the previous quarter. At the end of this article we will also compare RENT to other stocks including Barracuda Networks Inc (NYSE:CUDA), Erin Energy Corp (NYSEMKT:ERN), and Greenlight Capital Re, Ltd. (NASDAQ:GLRE) to get a better sense of its popularity.

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According to most market participants, hedge funds are perceived as unimportant, outdated financial tools of yesteryear. While there are greater than 8000 funds trading at the moment, Our experts look at the moguls of this club, approximately 700 funds. Most estimates calculate that this group of people control the majority of all hedge funds’ total capital, and by tracking their best investments, Insider Monkey has unearthed a number of investment strategies that have historically exceeded the S&P 500 index. Insider Monkey’s small-cap hedge fund strategy outpaced the S&P 500 index by 12 percentage points annually for a decade in their back tests.

With all of this in mind, let’s take a gander at the latest action encompassing Rentrak Corporation (NASDAQ:RENT).

What have hedge funds been doing with Rentrak Corporation (NASDAQ:RENT)?

At Q3’s end, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -18% from one quarter earlier. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Brett Barakett’s Tremblant Capital has the biggest position in Rentrak Corporation (NASDAQ:RENT), worth close to $40.5 million, corresponding to 2.6% of its total 13F portfolio. Coming in second is Chuck Royce of Royce & Associates, with an $24.3 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Other peers that are bullish contain Ken Grossman and Glen Schneider’s SG Capital Management, Clifford Fox’s Columbus Circle Investors and David Keidan’s Buckingham Capital Management.

Because Rentrak Corporation (NASDAQ:RENT) has faced falling interest from the aggregate hedge fund industry, we can see that there is a sect of money managers who were dropping their entire stakes heading into Q4. Interestingly, James Dinan’s York Capital Management said goodbye to the biggest stake of the “upper crust” of funds followed by Insider Monkey, valued at about $14 million in stock, and Andrew Sandler’s Sandler Capital Management was right behind this move, as the fund said goodbye to about $3.2 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest dropped by three funds heading into Q4.

Let’s check out hedge fund activity in other stocks similar to Rentrak Corporation (NASDAQ:RENT). We will take a look at Barracuda Networks Inc (NYSE:CUDA), Erin Energy Corp (NYSEMKT:ERN), Greenlight Capital Re, Ltd. (NASDAQ:GLRE), and Trina Solar Limited (ADR) (NYSE:TSL). All of these stocks’ market caps resemble RENT’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CUDA 14 22294 -2
ERN 5 1718 -2
GLRE 13 47731 -3
TSL 16 256244 -8

As you can see these stocks had an average of 12 hedge funds with bullish positions and the average amount invested in these stocks was $82 million. To give you a better idea hedge funds have amassed $118 million of RENT’s stock. Trina Solar Limited (ADR) (NYSE:TSL) is the most popular stock in this table, while Erin Energy Corp (NYSEMKT:ERN) is the least popular one with only 5 bullish hedge fund positions. Rentrak Corporation (NASDAQ:RENT) 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 TSL might be a better candidate to consider a long position.