The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We have processed the filings of the more than 700 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their December 31 holdings, data that is available nowhere else. Should you consider Ready Capital Corporation (NYSE:RC) for your portfolio? We’ll look to this invaluable collective wisdom for the answer.
Ready Capital Corporation (NYSE:RC) investors should be aware of an increase in hedge fund sentiment of late. RC was in 6 hedge funds’ portfolios at the end of the fourth quarter of 2018. There were 4 hedge funds in our database with RC positions at the end of the previous quarter. Our calculations also showed that RC isn’t among the 30 most popular stocks among hedge funds.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 32 percentage points since May 2014 through March 12, 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
Let’s view the new hedge fund action regarding Ready Capital Corporation (NYSE:RC).
What have hedge funds been doing with Ready Capital Corporation (NYSE:RC)?
At Q4’s end, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 50% from one quarter earlier. On the other hand, there were a total of 4 hedge funds with a bullish position in RC a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Farallon Capital, managed by Thomas Steyer, holds the biggest position in Ready Capital Corporation (NYSE:RC). Farallon Capital has a $30.5 million position in the stock, comprising 0.3% of its 13F portfolio. On Farallon Capital’s heels is Millennium Management, led by Israel Englander, holding a $1.5 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other members of the smart money that hold long positions encompass Paul Marshall and Ian Wace’s Marshall Wace LLP, Jim Simons’s Renaissance Technologies and Ken Griffin’s Citadel Investment Group.
Consequently, some big names were leading the bulls’ herd. Farallon Capital, managed by Thomas Steyer, created the most valuable position in Ready Capital Corporation (NYSE:RC). Farallon Capital had $30.5 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also made a $1.5 million investment in the stock during the quarter. The following funds were also among the new RC investors: Paul Marshall and Ian Wace’s Marshall Wace LLP, Jim Simons’s Renaissance Technologies, and Ken Griffin’s Citadel Investment Group.
Let’s check out hedge fund activity in other stocks similar to Ready Capital Corporation (NYSE:RC). We will take a look at Mesoblast Limited (NASDAQ:MESO), Team, Inc. (NYSE:TISI), BioSpecifics Technologies Corp. (NASDAQ:BSTC), and PennantPark Investment Corp. (NASDAQ:PNNT). This group of stocks’ market valuations resemble RC’s market valuation.
|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 8 hedge funds with bullish positions and the average amount invested in these stocks was $34 million. That figure was $36 million in RC’s case. Team, Inc. (NYSE:TISI) is the most popular stock in this table. On the other hand Mesoblast Limited (NASDAQ:MESO) is the least popular one with only 1 bullish hedge fund positions. Ready Capital Corporation (NYSE:RC) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately RC wasn’t nearly as popular as these 15 stock (hedge fund sentiment was quite bearish); RC investors were disappointed as the stock returned 9.7% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.