At Insider Monkey we track the activity of some of the best-performing hedge funds like Appaloosa Management, Baupost, and Tiger Global because we determined that some of the stocks that they are collectively bullish on can help us generate returns above the broader indices. Out of thousands of stocks that hedge funds invest in, small-caps can provide the best returns over the long term due to the fact that these companies are less efficiently priced and are usually under the radars of mass-media, analysts and dumb money. This is why we follow the smart money moves in the small-cap space.
Is Ring Energy Inc (NYSE:REI) a buy, sell, or hold? Investors who are in the know are getting more bullish. The number of bullish hedge fund bets advanced by 5 recently. Our calculations also showed that rei isn’t among the 30 most popular stocks among hedge funds. REI was in 13 hedge funds’ portfolios at the end of the first quarter of 2019. There were 8 hedge funds in our database with REI holdings at the end of the previous quarter.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Let’s take a look at the latest hedge fund action encompassing Ring Energy Inc (NYSE:REI).
Hedge fund activity in Ring Energy Inc (NYSE:REI)
At Q1’s end, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 63% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards REI over the last 15 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Daruma Asset Management held the most valuable stake in Ring Energy Inc (NYSE:REI), which was worth $19.7 million at the end of the first quarter. On the second spot was Cannell Capital which amassed $6.7 million worth of shares. Moreover, Citadel Investment Group, Springbok Capital, and Fisher Asset Management were also bullish on Ring Energy Inc (NYSEREI), allocating a large percentage of their portfolios to this stock.
As one would reasonably expect, some big names were breaking ground themselves. Laurion Capital Management, managed by Benjamin A. Smith, created the most outsized position in Ring Energy Inc (NYSE:REI). Laurion Capital Management had $0.3 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP also initiated a $0.2 million position during the quarter. The other funds with new positions in the stock are Thomas Bailard’s Bailard Inc, David Harding’s Winton Capital Management, and Mike Vranos’s Ellington.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Ring Energy Inc (NYSE:REI) but similarly valued. We will take a look at Beazer Homes USA, Inc. (NYSE:BZH), MannKind Corporation (NASDAQ:MNKD), Limelight Networks, Inc. (NASDAQ:LLNW), and Simulations Plus, Inc. (NASDAQ:SLP). This group of stocks’ market values are closest to REI’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BZH | 9 | 28100 | -4 |
| MNKD | 7 | 16220 | -1 |
| LLNW | 12 | 39931 | -3 |
| SLP | 6 | 20658 | 1 |
| Average | 8.5 | 26227 | -1.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.5 hedge funds with bullish positions and the average amount invested in these stocks was $26 million. That figure was $33 million in REI’s case. Limelight Networks, Inc. (NASDAQ:LLNW) is the most popular stock in this table. On the other hand Simulations Plus, Inc. (NASDAQ:SLP) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Ring Energy Inc (NYSE:REI) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately REI wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on REI were disappointed as the stock returned -45.5% 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.