At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (see why hell is coming). We reversed our stance on March 25th after seeing unprecedented fiscal and monetary stimulus unleashed by the Fed and the Congress. This is the perfect market for stock pickers, now that the stocks are fully valued again. In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards RealPage, Inc. (NASDAQ:RP) at the end of the second quarter and determine whether the smart money was really smart about this stock.
Is RealPage, Inc. (NASDAQ:RP) a buy, sell, or hold? Prominent investors were becoming hopeful. The number of bullish hedge fund positions moved up by 10 in recent months. RealPage, Inc. (NASDAQ:RP) was in 39 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 36. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that RP isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). There were 29 hedge funds in our database with RP positions at the end of the first quarter.
Video: 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 a select group of hedge fund holdings outperformed the S&P 500 ETFs by 56 percentage points since March 2017 (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 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this junior gold mining stock. Legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Keeping this in mind we’re going to take a glance at the fresh hedge fund action surrounding RealPage, Inc. (NASDAQ:RP).
Hedge fund activity in RealPage, Inc. (NASDAQ:RP)
At Q2’s end, a total of 39 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 34% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in RP over the last 20 quarters. With the smart money’s sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Eminence Capital, managed by Ricky Sandler, holds the number one position in RealPage, Inc. (NASDAQ:RP). Eminence Capital has a $210.5 million position in the stock, comprising 2.1% of its 13F portfolio. The second largest stake is held by Sharlyn C. Heslam of Stockbridge Partners, with a $157.2 million position; the fund has 4.9% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors that hold long positions encompass Greg Poole’s Echo Street Capital Management, Ken Griffin’s Citadel Investment Group and Robert G. Moses’s RGM Capital. In terms of the portfolio weights assigned to each position Banbury Partners allocated the biggest weight to RealPage, Inc. (NASDAQ:RP), around 8.07% of its 13F portfolio. Stockbridge Partners is also relatively very bullish on the stock, designating 4.93 percent of its 13F equity portfolio to RP.
Consequently, specific money managers have jumped into RealPage, Inc. (NASDAQ:RP) headfirst. Millennium Management, managed by Israel Englander, created the largest position in RealPage, Inc. (NASDAQ:RP). Millennium Management had $13.5 million invested in the company at the end of the quarter. Doug Silverman and Alexander Klabin’s Senator Investment Group also initiated a $5.2 million position during the quarter. The following funds were also among the new RP investors: Renaissance Technologies, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, and Matthew L Pinz’s Pinz Capital.
Let’s also examine hedge fund activity in other stocks similar to RealPage, Inc. (NASDAQ:RP). We will take a look at Commerce Bancshares, Inc. (NASDAQ:CBSH), Dolby Laboratories, Inc. (NYSE:DLB), UGI Corp (NYSE:UGI), Diamondback Energy Inc (NASDAQ:FANG), Carlisle Companies, Inc. (NYSE:CSL), The Boston Beer Company Inc (NYSE:SAM), and Lear Corporation (NYSE:LEA). This group of stocks’ market caps are similar to RP’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 30 hedge funds with bullish positions and the average amount invested in these stocks was $415 million. That figure was $740 million in RP’s case. Lear Corporation (NYSE:LEA) is the most popular stock in this table. On the other hand Commerce Bancshares, Inc. (NASDAQ:CBSH) is the least popular one with only 16 bullish hedge fund positions. RealPage, Inc. (NASDAQ:RP) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for RP is 86. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 33% in 2020 through the end of August and beat the market by 23.2 percentage points. Unfortunately RP wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on RP were disappointed as the stock returned -3.7% during the same time 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 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
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Disclosure: None. This article was originally published at Insider Monkey.