Coronavirus is probably the #1 concern in investors’ minds right now. It should be. We estimate that COVID-19 will kill around 5 million people worldwide and there is a 3.3% probability that Donald Trump will die from the new coronavirus (read the details). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. With the first-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the second quarter. One of these stocks was RingCentral Inc (NYSE:RNG).
RingCentral Inc (NYSE:RNG) was in 62 hedge funds’ portfolios at the end of the fourth quarter of 2019. RNG investors should be aware of an increase in activity from the world’s largest hedge funds in recent months. There were 52 hedge funds in our database with RNG positions at the end of the previous quarter. Our calculations also showed that RNG isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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 monthly stock picks returned 72.9% since March 2017 and outperformed the S&P 500 ETFs by more than 41 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Chase Coleman of Tiger Global
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. In January, we recommended a long position in one of the most shorted stocks in the market, and that stock returned more than 50% despite the large losses in the market since our recommendation. With all of this in mind let’s view the key hedge fund action encompassing RingCentral Inc (NYSE:RNG).
Hedge fund activity in RingCentral Inc (NYSE:RNG)
At the end of the fourth quarter, a total of 62 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 19% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in RNG over the last 18 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.
According to Insider Monkey’s hedge fund database, Chase Coleman’s Tiger Global Management LLC has the largest position in RingCentral Inc (NYSE:RNG), worth close to $556.1 million, amounting to 3.1% of its total 13F portfolio. On Tiger Global Management LLC’s heels is Coatue Management, led by Philippe Laffont, holding a $360 million position; the fund has 2.9% of its 13F portfolio invested in the stock. Remaining members of the smart money that are bullish comprise Panayotis Takis Sparaggis’s Alkeon Capital Management, Christopher Lyle’s SCGE Management and John Overdeck and David Siegel’s Two Sigma Advisors. In terms of the portfolio weights assigned to each position Stamina Capital Management allocated the biggest weight to RingCentral Inc (NYSE:RNG), around 11.93% of its 13F portfolio. Hunt Lane Capital is also relatively very bullish on the stock, earmarking 9.94 percent of its 13F equity portfolio to RNG.
As industrywide interest jumped, specific money managers were breaking ground themselves. Adage Capital Management, managed by Phill Gross and Robert Atchinson, created the largest position in RingCentral Inc (NYSE:RNG). Adage Capital Management had $27.8 million invested in the company at the end of the quarter. David Fiszel’s Honeycomb Asset Management also made a $21.1 million investment in the stock during the quarter. The other funds with new positions in the stock are Christopher Weldon’s Stamina Capital Management, Gregg Moskowitz’s Interval Partners, and Bobby Yazdani and Babak Poushanchi’s Cota Capital.
Let’s check out hedge fund activity in other stocks similar to RingCentral Inc (NYSE:RNG). We will take a look at Genmab A/S (NASDAQ:GMAB), Ulta Beauty, Inc. (NASDAQ:ULTA), Hasbro, Inc. (NASDAQ:HAS), and Citrix Systems, Inc. (NASDAQ:CTXS). This group of stocks’ market values are closest to RNG’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| GMAB | 12 | 107919 | 1 |
| ULTA | 41 | 1245257 | 0 |
| HAS | 36 | 523095 | 4 |
| CTXS | 34 | 1513753 | 3 |
| Average | 30.75 | 847506 | 2 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 30.75 hedge funds with bullish positions and the average amount invested in these stocks was $848 million. That figure was $2456 million in RNG’s case. Ulta Beauty, Inc. (NASDAQ:ULTA) is the most popular stock in this table. On the other hand Genmab A/S (NASDAQ:GMAB) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks RingCentral Inc (NYSE:RNG) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 12.9% in 2020 through March 9th but still managed to beat the market by 1.9 percentage points. Hedge funds were also right about betting on RNG as the stock returned 24.2% so far in Q1 (through March 9th) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.
