Hedge Funds Have Never Been This Bullish On RingCentral (RNG)

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of RingCentral Inc (NYSE:RNG) based on that data.

RingCentral Inc (NYSE:RNG) was in 67 hedge funds’ portfolios at the end of March. RNG has experienced an increase in enthusiasm from smart money in recent months. There were 62 hedge funds in our database with RNG holdings 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 Q1 rankings and see the video for a quick look at the top 5 stocks).

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 44 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 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Glen Kacher of Light Street Capital

At Insider Monkey 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 checked out this European marijuana stock pitch. Also, we are still not out of the woods in terms of the coronavirus pandemic. So, we checked out this analyst’s “corona catalyst plays“.  We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to check out the new hedge fund action surrounding RingCentral Inc (NYSE:RNG).

How have hedgies been trading RingCentral Inc (NYSE:RNG)?

Heading into the second quarter of 2020, a total of 67 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 8% from the fourth quarter of 2019. By comparison, 43 hedge funds held shares or bullish call options in RNG a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Alkeon Capital Management, managed by Panayotis Takis Sparaggis, holds the biggest position in RingCentral Inc (NYSE:RNG). Alkeon Capital Management has a $705.6 million position in the stock, comprising 3% of its 13F portfolio. On Alkeon Capital Management’s heels is Tiger Global Management LLC, led by Chase Coleman, holding a $704.9 million position; 4.2% of its 13F portfolio is allocated to the stock. Other members of the smart money with similar optimism comprise Christopher Lyle’s SCGE Management, Nancy Zevenbergen’s Zevenbergen Capital Investments and Amish Mehta’s SQN Investors. In terms of the portfolio weights assigned to each position SQN Investors allocated the biggest weight to RingCentral Inc (NYSE:RNG), around 12.11% of its 13F portfolio. Cota Capital is also relatively very bullish on the stock, setting aside 11.22 percent of its 13F equity portfolio to RNG.

With a general bullishness amongst the heavyweights, key hedge funds were leading the bulls’ herd. Whale Rock Capital Management, managed by Alex Sacerdote, established the biggest position in RingCentral Inc (NYSE:RNG). Whale Rock Capital Management had $50.8 million invested in the company at the end of the quarter. Glen Kacher’s Light Street Capital also made a $36 million investment in the stock during the quarter. The other funds with new positions in the stock are Adam Parker’s Center Lake Capital, Josh Resnick’s Jericho Capital Asset Management, and Jacob Doft’s Highline Capital Management.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as RingCentral Inc (NYSE:RNG) but similarly valued. These stocks are Southwest Airlines Co. (NYSE:LUV), DTE Energy Company (NYSE:DTE), Delta Air Lines, Inc. (NYSE:DAL), and AmerisourceBergen Corporation (NYSE:ABC). This group of stocks’ market values match RNG’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
LUV 45 2344803 1
DTE 29 516788 -6
DAL 53 2970479 -17
ABC 41 634674 1
Average 42 1616686 -5.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 42 hedge funds with bullish positions and the average amount invested in these stocks was $1617 million. That figure was $2828 million in RNG’s case. Delta Air Lines, Inc. (NYSE:DAL) is the most popular stock in this table. On the other hand DTE Energy Company (NYSE:DTE) is the least popular one with only 29 bullish hedge fund positions. Compared to these stocks RingCentral Inc (NYSE:RNG) is more popular among hedge funds. 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 returned 7.9% in 2020 through May 22nd but still managed to beat the market by 15.6 percentage points. Hedge funds were also right about betting on RNG as the stock returned 23.4% so far in Q2 (through May 22nd) 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.