Is Retail Opportunity Investments Corp (ROIC) Stock A Buy?

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Since the end of March, investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned more than 50% since its bottom. In this article you are going to find out whether hedge funds thought Retail Opportunity Investments Corp (NASDAQ:ROIC) was a good investment heading into the third quarter and how the stock traded in comparison to the top hedge fund picks.

Is Retail Opportunity Investments Corp (NASDAQ:ROIC) a superb investment today? Hedge funds were getting more bullish. The number of bullish hedge fund bets rose by 2 lately. Retail Opportunity Investments Corp (NASDAQ:ROIC) was in 20 hedge funds’ portfolios at the end of June. The all time high for this statistics is 21. Our calculations also showed that ROIC isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). There were 18 hedge funds in our database with ROIC positions at the end of the first quarter.

Video: Watch our video about the top 5 most popular hedge fund stocks.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 56 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

David Siegel of Two Sigma Advisors

David Siegel of Two Sigma Advisors

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 are checking out this junior gold mining stock and we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world 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 to get excerpts of these letters in your inbox. With all of this in mind let’s take a glance at the key hedge fund action surrounding Retail Opportunity Investments Corp (NASDAQ:ROIC).

Hedge fund activity in Retail Opportunity Investments Corp (NASDAQ:ROIC)

At second quarter’s end, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a change of 11% from one quarter earlier. On the other hand, there were a total of 13 hedge funds with a bullish position in ROIC a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).

Is ROIC A Good Stock To Buy?

More specifically, Waterfront Capital Partners was the largest shareholder of Retail Opportunity Investments Corp (NASDAQ:ROIC), with a stake worth $20 million reported as of the end of September. Trailing Waterfront Capital Partners was Carlson Capital, which amassed a stake valued at $16.6 million. Renaissance Technologies, Two Sigma Advisors, and D E Shaw 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 Waterfront Capital Partners allocated the biggest weight to Retail Opportunity Investments Corp (NASDAQ:ROIC), around 3.3% of its 13F portfolio. Scion Asset Management is also relatively very bullish on the stock, designating 1.8 percent of its 13F equity portfolio to ROIC.

As one would reasonably expect, some big names have been driving this bullishness. Waterfront Capital Partners, managed by Eduardo Abush, initiated the biggest position in Retail Opportunity Investments Corp (NASDAQ:ROIC). Waterfront Capital Partners had $20 million invested in the company at the end of the quarter. Clint Carlson’s Carlson Capital also made a $16.6 million investment in the stock during the quarter. The other funds with new positions in the stock are Michael Burry’s Scion Asset Management, Mark McMeans’s Brasada Capital Management, and Paul Marshall and Ian Wace’s Marshall Wace LLP.

Let’s now take a look at hedge fund activity in other stocks similar to Retail Opportunity Investments Corp (NASDAQ:ROIC). These stocks are Axos Financial, Inc. (NYSE:AX), Sorrento Therapeutics Inc (NASDAQ:SRNE), Itau CorpBanca (NYSE:ITCB), Arvinas, Inc. (NASDAQ:ARVN), Mobile Mini Inc (NASDAQ:MINI), CBIZ, Inc. (NYSE:CBZ), and SunPower Corporation (NASDAQ:SPWR). This group of stocks’ market valuations match ROIC’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AX 17 45679 5
SRNE 12 56365 7
ITCB 1 1225 0
ARVN 31 310963 6
MINI 20 165538 2
CBZ 14 176335 4
SPWR 16 32788 2
Average 15.9 112699 3.7

View table here if you experience formatting issues.

As you can see these stocks had an average of 15.9 hedge funds with bullish positions and the average amount invested in these stocks was $113 million. That figure was $88 million in ROIC’s case. Arvinas, Inc. (NASDAQ:ARVN) is the most popular stock in this table. On the other hand Itau CorpBanca (NYSE:ITCB) is the least popular one with only 1 bullish hedge fund positions. Retail Opportunity Investments Corp (NASDAQ:ROIC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ROIC is 35.6. 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 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 24.8% in 2020 through the end of September and beat the market by 19.3 percentage points. Unfortunately ROIC wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on ROIC were disappointed as the stock returned -8% in Q3 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.