Is Red Lion Hotels Corporation (RLH) A Good Stock To Buy?

We view hedge fund activity in the stock unfavorable, but, in this case, there was only a single hedge fund selling its entire position: Nantahala Capital Management. 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 700+ hedge funds tracked by Insider Monkey identified RLH as a viable investment and initiated a position in the stock.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Red Lion Hotels Corporation (NYSE:RLH) but similarly valued. We will take a look at Newtek Business Services, Inc (NASDAQ:NEWT), Corium International Inc (NASDAQ:CORI), Townsquare Media Inc (NYSE:TSQ), and Dicerna Pharmaceuticals Inc (NASDAQ:DRNA). All of these stocks’ market caps are closest to RLH’s market cap.

As you can see these stocks had an average of 7 hedge funds with bullish positions and the average amount invested in these stocks was $30 million. That figure was $10 million in RLH’s case. Townsquare Media Inc (NYSE:TSQ) is the most popular stock in this table, whereas Newtek Business Services, Inc (NASDAQ:NEWT) is the least popular one with only 4 bullish hedge fund positions. In comparison, with 5 bullish hedge fund positions Red Lion Hotels Corporation (NYSE: RHL) is not the least popular, but next to it, which indicates a hedge fund interest below average. This may imply that Red Lion Hotels Corporation (NYSE:RHL) is not a good stock to buy, therefore we’d rather spend our time researching stocks that hedge funds are piling on. In this particular case, a better choice for investment might be Townsquare Media Inc (NYSE:TSQ).