Is Rubicon Technology, Inc. (RBCN) Going to Burn These Hedge Funds?

Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Rubicon Technology, Inc. (NASDAQ:RBCN).

Hedge fund interest in Rubicon Technology, Inc. (NASDAQ:RBCN) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that RBCN isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). At the end of this article we will also compare RBCN to other stocks including Ashford Inc. (NYSE:AINC), Chicago Rivet & Machine Co. (NYSE:CVR), and China Liberal Education Holdings Limited (NASDAQ:CLEU) to get a better sense of its popularity.

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. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. 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 115 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund wants to buy this $28 biotech stock for $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Now we’re going to take a peek at the key hedge fund action encompassing Rubicon Technology, Inc. (NASDAQ:RBCN).

Do Hedge Funds Think RBCN Is A Good Stock To Buy Now?

At the end of the first quarter, a total of 3 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in RBCN over the last 23 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to Insider Monkey’s hedge fund database, Gregory Bylinsky and Jefferson Gramm’s Bandera Partners has the number one position in Rubicon Technology, Inc. (NASDAQ:RBCN), worth close to $2.7 million, accounting for 1.1% of its total 13F portfolio. The second most bullish fund manager is Renaissance Technologies, which holds a $1.1 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. In terms of the portfolio weights assigned to each position Bandera Partners allocated the biggest weight to Rubicon Technology, Inc. (NASDAQ:RBCN), around 1.05% of its 13F portfolio. Ariel Investments is also relatively very bullish on the stock, earmarking 0.01 percent of its 13F equity portfolio to RBCN.

Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren’t any hedge funds dumping their holdings during the third quarter, there weren’t any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven’t identified any viable catalysts that can attract investor attention.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Rubicon Technology, Inc. (NASDAQ:RBCN) but similarly valued. These stocks are Ashford Inc. (NYSE:AINC), Chicago Rivet & Machine Co. (NYSE:CVR), China Liberal Education Holdings Limited (NASDAQ:CLEU), Aethlon Medical, Inc. (NASDAQ:AEMD), NanoVibronix, Inc. (NASDAQ:NAOV), China Recycling Energy Corp. (NASDAQ:CREG), and MoSys Inc. (NASDAQ:MOSY). All of these stocks’ market caps are similar to RBCN’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 2.1 hedge funds with bullish positions and the average amount invested in these stocks was $1 million. That figure was $4 million in RBCN’s case. Aethlon Medical, Inc. (NASDAQ:AEMD) is the most popular stock in this table. On the other hand China Liberal Education Holdings Limited (NASDAQ:CLEU) is the least popular one with only 1 bullish hedge fund positions. Rubicon Technology, Inc. (NASDAQ:RBCN) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for RBCN is 73. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 17.2% in 2021 through June 11th and beat the market again by 3.3 percentage points. Unfortunately RBCN wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on RBCN were disappointed as the stock returned -4.6% since the end of March (through 6/11) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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

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