Hedge Funds Have Never Been This Bullish On The RMR Group Inc. (RMR)

We are still in an overall bull market and many stocks that smart money investors were piling into surged through October 17th. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 45% and 39% respectively. Hedge funds’ top 3 stock picks returned 34.4% this year and beat the S&P 500 ETFs by 13 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like The RMR Group Inc. (NASDAQ:RMR).

The RMR Group Inc. (NASDAQ:RMR) investors should pay attention to an increase in hedge fund interest in recent months. Our calculations also showed that RMR isn’t among the 30 most popular stocks among hedge funds (see the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

At the moment there are several metrics investors put to use to value publicly traded companies. A pair of the most underrated metrics are hedge fund and insider trading interest. Our experts have shown that, historically, those who follow the top picks of the top fund managers can beat the market by a very impressive margin (see the details here).

Arnaud Ajdler Engine Capital

Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s take a glance at the fresh hedge fund action surrounding The RMR Group Inc. (NASDAQ:RMR).

How are hedge funds trading The RMR Group Inc. (NASDAQ:RMR)?

Heading into the third quarter of 2019, a total of 22 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 10% from one quarter earlier. By comparison, 11 hedge funds held shares or bullish call options in RMR a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with RMR Positions

Among these funds, Engine Capital held the most valuable stake in The RMR Group Inc. (NASDAQ:RMR), which was worth $34.3 million at the end of the second quarter. On the second spot was Hawk Ridge Management which amassed $33.6 million worth of shares. Moreover, Zimmer Partners, Millennium Management, and Indaba Capital Management were also bullish on The RMR Group Inc. (NASDAQ:RMR), allocating a large percentage of their portfolios to this stock.

As aggregate interest increased, key money managers have been driving this bullishness. Engine Capital, managed by Arnaud Ajdler, assembled the most valuable position in The RMR Group Inc. (NASDAQ:RMR). Engine Capital had $34.3 million invested in the company at the end of the quarter. Stuart J. Zimmer’s Zimmer Partners also initiated a $29.4 million position during the quarter. The other funds with brand new RMR positions are Derek C. Schrier’s Indaba Capital Management, Benjamin A. Smith’s Laurion Capital Management, and Joseph Samuels’s Islet Management.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as The RMR Group Inc. (NASDAQ:RMR) but similarly valued. These stocks are World Acceptance Corporation (NASDAQ:WRLD), Skyline Champion Corporation (NYSE:SKY), Tanger Factory Outlet Centers Inc. (NYSE:SKT), and Arch Coal, Inc. (NYSE:ARCH). This group of stocks’ market valuations match RMR’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
WRLD 11 279010 -2
SKY 25 258382 1
SKT 14 85927 -1
ARCH 27 364937 -1
Average 19.25 247064 -0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 19.25 hedge funds with bullish positions and the average amount invested in these stocks was $247 million. That figure was $207 million in RMR’s case. Arch Coal, Inc. (NYSE:ARCH) is the most popular stock in this table. On the other hand World Acceptance Corporation (NASDAQ:WRLD) is the least popular one with only 11 bullish hedge fund positions. The RMR Group Inc. (NASDAQ:RMR) is not the most popular stock in this group but hedge fund interest is still above average. 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 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately RMR wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on RMR were disappointed as the stock returned -2.5% during the third quarter 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 many of these stocks already outperformed the market so far this year.

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