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 817 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their September 30 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.
Is RC a good stock to buy now? Ready Capital Corporation (NYSE:RC) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 10 hedge funds’ portfolios at the end of the third quarter of 2020. Our calculations also showed that RC isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Inozyme Pharma, Inc. (NASDAQ:INZY), Cellcom Israel Ltd. (NYSE:CEL), and Knoll Inc (NYSE:KNL) to gather more data points.
Video: Watch our video about the top 5 most popular hedge fund stocks.
To most shareholders, hedge funds are seen as slow, old financial tools of the past. While there are more than 8000 funds with their doors open at present, Our researchers hone in on the top tier of this club, about 850 funds. It is estimated that this group of investors have their hands on bulk of the smart money’s total asset base, and by tracking their matchless investments, Insider Monkey has figured out a number of investment strategies that have historically outstripped the broader indices. Insider Monkey’s flagship short hedge fund strategy defeated the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 13% since February 2017 (through November 17th) even though the market was up 65% during the same period. We just shared a list of 6 short targets in our latest quarterly update .
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Now let’s take a peek at the new hedge fund action surrounding Ready Capital Corporation (NYSE:RC).
Do Hedge Funds Think RC Is A Good Stock To Buy Now?
At the end of September, a total of 10 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the second quarter of 2020. By comparison, 4 hedge funds held shares or bullish call options in RC 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.
The largest stake in Ready Capital Corporation (NYSE:RC) was held by Farallon Capital, which reported holding $15.1 million worth of stock at the end of September. It was followed by Ellington with a $3.8 million position. Other investors bullish on the company included EJF Capital, Citadel Investment Group, and Arrowstreet Capital. In terms of the portfolio weights assigned to each position Ellington allocated the biggest weight to Ready Capital Corporation (NYSE:RC), around 1.34% of its 13F portfolio. EJF Capital is also relatively very bullish on the stock, earmarking 0.25 percent of its 13F equity portfolio to RC.
Due to the fact that Ready Capital Corporation (NYSE:RC) has experienced declining sentiment from the aggregate hedge fund industry, it’s safe to say that there was a specific group of funds that slashed their full holdings by the end of the third quarter. Interestingly, Warren Lammert’s Granite Point Capital dumped the biggest stake of all the hedgies followed by Insider Monkey, comprising close to $0.4 million in stock, and D. E. Shaw’s D E Shaw was right behind this move, as the fund dumped about $0.2 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Ready Capital Corporation (NYSE:RC) but similarly valued. These stocks are Inozyme Pharma, Inc. (NASDAQ:INZY), Cellcom Israel Ltd. (NYSE:CEL), Knoll Inc (NYSE:KNL), P.H. Glatfelter Company (NYSE:GLT), Goldman Sachs BDC, Inc. (NYSE:GSBD), Autolus Therapeutics plc (NASDAQ:AUTL), and First Bancorp (NASDAQ:FBNC). All of these stocks’ market caps resemble RC’s market cap.
|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 8.3 hedge funds with bullish positions and the average amount invested in these stocks was $35 million. That figure was $27 million in RC’s case. First Bancorp (NASDAQ:FBNC) is the most popular stock in this table. On the other hand Cellcom Israel Ltd. (NYSE:CEL) is the least popular one with only 2 bullish hedge fund positions. Ready Capital Corporation (NYSE:RC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for RC is 50. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and beat the market again by 16.2 percentage points. Unfortunately RC wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on RC were disappointed as the stock returned 9.6% since the end of September (through 12/8) 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.