Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 750 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Realogy Holdings Corp (NYSE:RLGY).
Is Realogy Holdings Corp (NYSE:RLGY) undervalued? The best stock pickers are in a bearish mood. The number of bullish hedge fund bets shrunk by 4 lately. Our calculations also showed that RLGY isn’t among the 30 most popular stocks among hedge funds (see the video below). RLGY was in 24 hedge funds’ portfolios at the end of June. There were 28 hedge funds in our database with RLGY holdings at the end of the previous quarter.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to check out the key hedge fund action encompassing Realogy Holdings Corp (NYSE:RLGY).
What have hedge funds been doing with Realogy Holdings Corp (NYSE:RLGY)?
Heading into the third quarter of 2019, a total of 24 of the hedge funds tracked by Insider Monkey were long this stock, a change of -14% from one quarter earlier. On the other hand, there were a total of 19 hedge funds with a bullish position in RLGY a year ago. 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 Realogy Holdings Corp (NYSE:RLGY) was held by Southeastern Asset Management, which reported holding $95.4 million worth of stock at the end of March. It was followed by Tremblant Capital with a $64.7 million position. Other investors bullish on the company included Okumus Fund Management, Pzena Investment Management, and Bridgewater Associates.
Since Realogy Holdings Corp (NYSE:RLGY) has faced a decline in interest from the smart money, logic holds that there exists a select few hedgies who were dropping their positions entirely in the second quarter. At the top of the heap, Brandon Haley’s Holocene Advisors said goodbye to the largest investment of the 750 funds followed by Insider Monkey, valued at close to $15.3 million in call options, and David Keidan’s Buckingham Capital Management was right behind this move, as the fund dropped about $9.1 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest was cut by 4 funds in the second quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Realogy Holdings Corp (NYSE:RLGY) but similarly valued. We will take a look at Rhythm Pharmaceuticals, Inc. (NASDAQ:RYTM), Y-mAbs Therapeutics, Inc. (NASDAQ:YMAB), Virtus Investment Partners Inc (NASDAQ:VRTS), and CBTX, Inc. (NASDAQ:CBTX). This group of stocks’ market values match RLGY’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| RYTM | 10 | 148953 | -1 |
| YMAB | 7 | 40648 | 3 |
| VRTS | 17 | 112061 | 2 |
| CBTX | 7 | 13137 | -1 |
| Average | 10.25 | 78700 | 0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.25 hedge funds with bullish positions and the average amount invested in these stocks was $79 million. That figure was $300 million in RLGY’s case. Virtus Investment Partners Inc (NASDAQ:VRTS) is the most popular stock in this table. On the other hand Y-mAbs Therapeutics, Inc. (NASDAQ:YMAB) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Realogy Holdings Corp (NYSE:RLGY) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately RLGY wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on RLGY were disappointed as the stock returned -6.4% during the third quarter 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 in Q3.
Disclosure: None. This article was originally published at Insider Monkey.
