We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Hudson Bay 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 only one of the 700+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Citadel Investment Group).
Let’s now review hedge fund activity in other stocks similar to Ring Energy Inc (NYSEMKT:REI). These stocks are OceanFirst Financial Corp. (NASDAQ:OCFC), Consolidated-Tomoka Land Co. (NYSEAMEX:CTO), BioSpecifics Technologies Corp. (NASDAQ:BSTC), and Vocera Communications Inc (NYSE:VCRA). This group of stocks’ market valuations match REI’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 9 hedge funds with bullish positions and the average amount invested in these stocks was $42 million, compared to $31 million in REI’s case. Vocera Communications Inc (NYSE:VCRA) is the most popular stock in this table. On the other hand BioSpecifics Technologies Corp. (NASDAQ:BSTC) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Ring Energy Inc (NYSEMKT:REI) is even less popular than BSTC. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.