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Here is What Hedge Funds Think About RiceBran Technologies (RIBT)

In this article we will take a look at whether hedge funds think RiceBran Technologies (NASDAQ:RIBT) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

Is RiceBran Technologies (NASDAQ:RIBT) a bargain? Money managers are reducing their bets on the stock. The number of long hedge fund bets decreased by 1 lately. Our calculations also showed that RIBT 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.

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 S&P 500 ETFs by more than 58 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 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 stocks that are in our short portfolio.

RENAISSANCE TECHNOLOGIES

Jim Simons Founder of Renaissance Technologies

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. 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 let’s view the recent hedge fund action surrounding RiceBran Technologies (NASDAQ:RIBT).

How have hedgies been trading RiceBran Technologies (NASDAQ:RIBT)?

At the end of the first quarter, a total of 5 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -17% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards RIBT over the last 18 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, DG Capital Management was the largest shareholder of RiceBran Technologies (NASDAQ:RIBT), with a stake worth $2.4 million reported as of the end of September. Trailing DG Capital Management was Roumell Asset Management, which amassed a stake valued at $0.6 million. Renaissance Technologies, Royce & Associates, and Citadel Investment Group were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position DG Capital Management allocated the biggest weight to RiceBran Technologies (NASDAQ:RIBT), around 3.72% of its 13F portfolio. Roumell Asset Management is also relatively very bullish on the stock, earmarking 1.57 percent of its 13F equity portfolio to RIBT.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: ExodusPoint Capital. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because none of the 750+ hedge funds tracked by Insider Monkey identified RIBT as a viable investment and initiated a position in the stock.

Let’s go over hedge fund activity in other stocks similar to RiceBran Technologies (NASDAQ:RIBT). We will take a look at Elmira Savings Bank (NASDAQ:ESBK), Microbot Medical Inc. (NASDAQ:MBOT), Allied Esports Entertainment, Inc. (NASDAQ:AESE), and Idera Pharmaceuticals Inc (NASDAQ:IDRA). All of these stocks’ market caps match RIBT’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ESBK 1 157 0
MBOT 2 741 0
AESE 3 397 -1
IDRA 8 7838 1
Average 3.5 2283 0

View table here if you experience formatting issues.

As you can see these stocks had an average of 3.5 hedge funds with bullish positions and the average amount invested in these stocks was $2 million. That figure was $3 million in RIBT’s case. Idera Pharmaceuticals Inc (NASDAQ:IDRA) is the most popular stock in this table. On the other hand Elmira Savings Bank (NASDAQ:ESBK) is the least popular one with only 1 bullish hedge fund positions. RiceBran Technologies (NASDAQ:RIBT) 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 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 gained 8.3% in 2020 through the end of May but beat the market by 13.2 percentage points. Unfortunately RIBT wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on RIBT were disappointed as the stock returned 12% during the same time 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 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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