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Hedge Funds Have Never Been More Bullish On The Rubicon Project Inc (RUBI)

Reputable billionaire investors such as Jim Simons, Cliff Asness and David Tepper generate exorbitant profits for their wealthy accredited investors (a minimum of $1 million in investable assets would be required to invest in a hedge fund and most successful hedge funds won’t accept your savings unless you commit at least $5 million) by pinpointing winning small-cap stocks. There is little or no publicly-available information at all on some of these small companies, which makes it hard for an individual investor to pin down a winner within the small-cap space. However, hedge funds and other big asset managers can do the due diligence and analysis for you instead, thanks to their highly-skilled research teams and vast resources to conduct an appropriate evaluation process. Looking for potential winners within the small-cap galaxy of stocks? We believe following the smart money is a good starting point.

The Rubicon Project Inc (NYSE:RUBI) was in 25 hedge funds’ portfolios at the end of March. RUBI investors should be aware of an increase in support from the world’s most elite money managers of late. There were 22 hedge funds in our database with RUBI positions at the end of the previous quarter. Our calculations also showed that RUBI isn’t among the 30 most popular stocks among hedge funds.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Bruce Kovner, Caxton Associates LP

We’re going to take a gander at the recent hedge fund action regarding The Rubicon Project Inc (NYSE:RUBI).

What does the smart money think about The Rubicon Project Inc (NYSE:RUBI)?

At the end of the first quarter, a total of 25 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 14% from the previous quarter. On the other hand, there were a total of 10 hedge funds with a bullish position in RUBI a year ago. With hedge funds’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).

RUBI_june2019

The largest stake in The Rubicon Project Inc (NYSE:RUBI) was held by Royce & Associates, which reported holding $10.7 million worth of stock at the end of March. It was followed by D E Shaw with a $9.1 million position. Other investors bullish on the company included Renaissance Technologies, Harbert Management, and Two Sigma Advisors.

With a general bullishness amongst the heavyweights, specific money managers have been driving this bullishness. Driehaus Capital, managed by Richard Driehaus, initiated the largest position in The Rubicon Project Inc (NYSE:RUBI). Driehaus Capital had $1.9 million invested in the company at the end of the quarter. William C. Martin’s Raging Capital Management also initiated a $1 million position during the quarter. The following funds were also among the new RUBI investors: Bruce Kovner’s Caxton Associates LP, Mike Vranos’s Ellington, and Andrew Weiss’s Weiss Asset Management.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as The Rubicon Project Inc (NYSE:RUBI) but similarly valued. These stocks are NN, Inc. (NASDAQ:NNBR), OMNOVA Solutions Inc. (NYSE:OMN), Home Bancorp, Inc. (NASDAQ:HBCP), and Xinyuan Real Estate Co., Ltd. (NYSE:XIN). This group of stocks’ market valuations resemble RUBI’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NNBR 8 46546 0
OMN 17 51941 1
HBCP 3 7928 1
XIN 7 5256 -1
Average 8.75 27918 0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 8.75 hedge funds with bullish positions and the average amount invested in these stocks was $28 million. That figure was $62 million in RUBI’s case. OMNOVA Solutions Inc. (NYSE:OMN) is the most popular stock in this table. On the other hand Home Bancorp, Inc. (NASDAQ:HBCP) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks The Rubicon Project Inc (NYSE:RUBI) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 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 -9.2% during the same period 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 13 of these stocks already outperformed the market in Q2.

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

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