Radio One, Inc. (ROIAK): Are Hedge Funds Right About This Stock?

Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips on the charts, usually don’t make them change their opinion towards a company. This time, it may be different. During the third quarter, we observed increased volatility and small-cap stocks underperformed the market. Hedge fund investor letters indicated that they are cutting their overall exposure, closing out some positions and doubling down on others. Let’s take a look at the hedge fund sentiment towards Radio One, Inc. (NASDAQ:ROIAK) to find out whether it was one of their high conviction long-term ideas.

Radio One, Inc. (NASDAQ:ROIAK) shareholders have witnessed a decrease in support from the world’s most elite money managers recently. ROIAK was in 8 hedge funds’ portfolios at the end of September. There were 9 hedge funds in our database with ROIAK holdings at the end of the previous quarter. 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 Jernigan Capital Inc (NYSE:JCAP), GTx, Inc. (NASDAQ:GTXI), and Arowana Inc. Ordinary Shares (NASDAQ:ARWA) to gather more data points.

To most investors, hedge funds are assumed to be underperforming, old financial vehicles of yesteryear. While there are over 8000 funds in operation at the moment, Our experts look at the elite of this group, around 700 funds. Most estimates calculate that this group of people shepherd most of all hedge funds’ total asset base, and by tailing their finest picks, Insider Monkey has come up with a number of investment strategies that have historically exceeded the broader indices. Insider Monkey’s small-cap hedge fund strategy beat the S&P 500 index by 12 percentage points per year for a decade in their back tests.

With all of this in mind, we’re going to view the fresh action regarding Radio One, Inc. (NASDAQ:ROIAK).

Hedge fund activity in Radio One, Inc. (NASDAQ:ROIAK)

At Q3’s end, a total of 8 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -11% from the second quarter. With hedgies’ positions undergoing their usual ebb and flow, there exist a few key hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Third Avenue Management, managed by Martin Whitman, holds the number one position in Radio One, Inc. (NASDAQ:ROIAK). Third Avenue Management has a $4.9 million position in the stock, comprising 0.1% of its 13F portfolio. The second most bullish fund manager is Don Morgan of Brigade Capital, with a $2.6 million position; 0.3% of its 13F portfolio is allocated to the stock. Other peers that hold long positions contain Jim Simons’s Renaissance Technologies, Michael Reeber’s Andalusian Capital Partners and Israel Englander’s Millennium Management.

Seeing as Radio One, Inc. (NASDAQ:ROIAK) has faced declining sentiment from the aggregate hedge fund industry, it’s easy to see that there is a sect of hedge funds that elected to cut their full holdings heading into Q4. Interestingly, Paul J. Isaac’s Arbiter Partners Capital Management cut the largest investment of all the hedgies watched by Insider Monkey, valued at about $0.3 million in stock. Ben Levine, Andrew Manuel and Stefan Renold’s fund, LMR Partners, also said goodbye to its stock, about $0 million worth. These moves are important to note, as total hedge fund interest was cut by 1 fund heading into Q4.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Radio One, Inc. (NASDAQ:ROIAK) but similarly valued. We will take a look at Jernigan Capital Inc (NYSE:JCAP), GTx, Inc. (NASDAQ:GTXI), Arowana Inc. Ordinary Shares (NASDAQ:ARWA), and Rick’s Cabaret Int’l, Inc (NASDAQ:RICK). This group of stocks’ market values match ROIAK’s market value.

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 $10 million. That figure was $11 million in ROIAK’s case. Rick’s Cabaret Int’l, Inc (NASDAQ:RICK) is the most popular stock in this table, while the least popular one is GTx, Inc. (NASDAQ:GTXI).In comparison, Radio One, Inc. (NASDAQ:ROIAK) is not the most nor the least popular stock in this group, but hedge fund interest is still above average. Although this may indicate it is a stock worth considering, we’d rather spend our time researching stocks that hedge funds are piling on. In this case, RICK might be a better alternative for your portfolio.