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Rafael Holdings, Inc. (RFL): Hedge Funds In Wait-and-See Mode

A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended September 30, so let’s proceed with the discussion of the hedge fund sentiment on Rafael Holdings, Inc. (NYSE:RFL).

Rafael Holdings, Inc. (NYSE:RFL) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 6 hedge funds’ portfolios at the end of the third quarter of 2019. 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 CRA International, Inc. (NASDAQ:CRAI), Neptune Technologies & Bioresources Inc (NASDAQ:NEPT), and GTY Technology Holdings, Inc. (NASDAQ:GTYH) to gather more data points. Our calculations also showed that RFL isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

If you’d ask most stock holders, hedge funds are assumed to be underperforming, old investment vehicles of yesteryear. While there are over 8000 funds with their doors open today, Our researchers choose to focus on the masters of this club, approximately 750 funds. These hedge fund managers have their hands on bulk of all hedge funds’ total capital, and by following their inimitable investments, Insider Monkey has unsheathed many investment strategies that have historically beaten the market. Insider Monkey’s flagship short hedge fund strategy outrun the S&P 500 short ETFs by around 20 percentage points a year since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .

RENAISSANCE TECHNOLOGIES

Jim Simons of Renaissance Technologies

We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. Keeping this in mind we’re going to take a glance at the key hedge fund action encompassing Rafael Holdings, Inc. (NYSE:RFL).

Hedge fund activity in Rafael Holdings, Inc. (NYSE:RFL)

At the end of the third quarter, a total of 6 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the second quarter of 2019. On the other hand, there were a total of 13 hedge funds with a bullish position in RFL a year ago. With hedge funds’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).

Is RFL A Good Stock To Buy?

Among these funds, Renaissance Technologies held the most valuable stake in Rafael Holdings, Inc. (NYSE:RFL), which was worth $10.7 million at the end of the third quarter. On the second spot was Newtyn Management which amassed $10.2 million worth of shares. Nantahala Capital Management, Kahn Brothers, and Horizon Asset Management 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 Kahn Brothers allocated the biggest weight to Rafael Holdings, Inc. (NYSE:RFL), around 1.14% of its 13F portfolio. Newtyn Management is also relatively very bullish on the stock, dishing out 0.96 percent of its 13F equity portfolio to RFL.

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 now review hedge fund activity in other stocks – not necessarily in the same industry as Rafael Holdings, Inc. (NYSE:RFL) but similarly valued. We will take a look at CRA International, Inc. (NASDAQ:CRAI), Neptune Technologies & Bioresources Inc (NASDAQ:NEPT), GTY Technology Holdings, Inc. (NASDAQ:GTYH), and Metropolitan Bank Holding Corp. (NYSE:MCB). All of these stocks’ market caps match RFL’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CRAI 15 45421 1
NEPT 7 49362 -1
GTYH 4 19976 0
MCB 8 56934 2
Average 8.5 42923 0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 8.5 hedge funds with bullish positions and the average amount invested in these stocks was $43 million. That figure was $41 million in RFL’s case. CRA International, Inc. (NASDAQ:CRAI) is the most popular stock in this table. On the other hand GTY Technology Holdings, Inc. (NASDAQ:GTYH) is the least popular one with only 4 bullish hedge fund positions. Rafael Holdings, Inc. (NYSE:RFL) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately RFL wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); RFL investors were disappointed as the stock returned -19.3% during the first two months of the fourth quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market in Q4.

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

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