It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. The S&P 500 Index gained 7.6% in the 12 month-period that ended November 21, while less than 49% of its stocks beat the benchmark. In contrast, the 30 most popular mid-cap stocks among the top hedge fund investors tracked by the Insider Monkey team returned 18% over the same period, which provides evidence that these money managers do have great stock picking abilities. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Rambus Inc. (NASDAQ:RMBS).
Rambus Inc. (NASDAQ:RMBS) was in 14 hedge funds’ portfolios at the end of September. RMBS investors should be aware of an increase in support from the world’s most successful money managers of late. There were 9 hedge funds in our database with RMBS positions at the end of the second 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 Adecoagro SA (NYSE:AGRO), Stepan Company (NYSE:SCL), and Headwaters Inc (NYSE:HW) to gather more data points.
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
How are hedge funds trading Rambus Inc. (NASDAQ:RMBS)?
Heading into the fourth quarter of 2016, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, a 56% jump from the second quarter of 2016, as hedge fund ownership begins to make a big rebound. There were a total of just 8 hedge funds with a bullish position in RMBS at the beginning of this year. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Renaissance Technologies, founded by Jim Simons, holds the biggest position in Rambus Inc. (NASDAQ:RMBS). Renaissance Technologies has a $21.4 million position in the stock. The second largest stake is held by Millennium Management, founded by Israel Englander, which holds a $5.8 million position. Remaining professional money managers that are bullish include Glenn Russell Dubin’s Highbridge Capital Management and Ken Griffin’s Citadel Investment Group. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
With general bullishness amongst the heavyweights, specific money managers were leading the bulls’ herd. Citadel Investment Group assembled the most outsized call position in Rambus Inc. (NASDAQ:RMBS). Citadel Investment Group had $2.1 million invested in the company at the end of the quarter. George Soros’ Soros Fund Management also initiated a $1.6 million position during the quarter. The following funds were also among the new RMBS investors: Paul Marshall and Ian Wace’s Marshall Wace LLP, John Overdeck and David Siegel’s Two Sigma Advisors, and David Costen Haley’s HBK Investments.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Rambus Inc. (NASDAQ:RMBS) but similarly valued. We will take a look at Adecoagro SA (NYSE:AGRO), Stepan Company (NYSE:SCL), Headwaters Inc (NYSE:HW), and CONMED Corporation (NASDAQ:CNMD). This group of stocks’ market values are closest to RMBS’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 18 hedge funds with bullish positions and the average amount invested in these stocks was $183 million. That figure was $47 million in RMBS’s case. Headwaters Inc (NYSE:HW) is the most popular stock in this table. On the other hand Stepan Company (NYSE:SCL) is the least popular one with only 11 bullish hedge fund positions. Rambus Inc. (NASDAQ:RMBS) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard HW might be a better candidate to consider taking a long position in.