In this article we will check out the progression of hedge fund sentiment towards Realogy Holdings Corp (NYSE:RLGY) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Realogy Holdings Corp (NYSE:RLGY) has seen a decrease in enthusiasm from smart money in recent months. RLGY was in 25 hedge funds’ portfolios at the end of March. There were 30 hedge funds in our database with RLGY holdings at the end of the previous quarter. Our calculations also showed that RLGY isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
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 has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 58 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like these. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to take a glance at the new hedge fund action regarding Realogy Holdings Corp (NYSE:RLGY).
How are hedge funds trading Realogy Holdings Corp (NYSE:RLGY)?
At the end of the first quarter, a total of 25 of the hedge funds tracked by Insider Monkey were long this stock, a change of -17% from one quarter earlier. On the other hand, there were a total of 28 hedge funds with a bullish position in RLGY a year ago. With hedge funds’ sentiment swirling, there exists a few noteworthy hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Mason Hawkins’s Southeastern Asset Management has the most valuable position in Realogy Holdings Corp (NYSE:RLGY), worth close to $49.9 million, amounting to 1.2% of its total 13F portfolio. Coming in second is Michael Zimmerman of Prentice Capital Management, with a $13.3 million position; 6.3% of its 13F portfolio is allocated to the stock. Remaining peers that are bullish include Richard S. Pzena’s Pzena Investment Management, Brett Barakett’s Tremblant Capital and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital. In terms of the portfolio weights assigned to each position Prentice Capital Management allocated the biggest weight to Realogy Holdings Corp (NYSE:RLGY), around 6.32% of its 13F portfolio. Southeastern Asset Management is also relatively very bullish on the stock, earmarking 1.19 percent of its 13F equity portfolio to RLGY.
Since Realogy Holdings Corp (NYSE:RLGY) has faced bearish sentiment from hedge fund managers, it’s safe to say that there is a sect of fund managers that slashed their full holdings last quarter. Intriguingly, Ahmet Okumus’s Okumus Fund Management dropped the largest position of the 750 funds watched by Insider Monkey, worth about $79.3 million in stock, and Renaissance Technologies was right behind this move, as the fund cut about $12.8 million worth. These moves are interesting, as aggregate hedge fund interest fell by 5 funds last quarter.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Realogy Holdings Corp (NYSE:RLGY) but similarly valued. These stocks are International Money Express, Inc. (NASDAQ:IMXI), Artesian Resources Corporation (NASDAQ:ARTNA), The Bancorp, Inc. (NASDAQ:TBBK), and Mercantile Bank Corp. (NASDAQ:MBWM). All of these stocks’ market caps resemble RLGY’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 7.75 hedge funds with bullish positions and the average amount invested in these stocks was $37 million. That figure was $105 million in RLGY’s case. The Bancorp, Inc. (NASDAQ:TBBK) is the most popular stock in this table. On the other hand Artesian Resources Corporation (NASDAQ:ARTNA) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Realogy Holdings Corp (NYSE:RLGY) is more popular among hedge funds. 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 returned 13.9% in 2020 through June 10th but still managed to beat the market by 14.2 percentage points. Hedge funds were also right about betting on RLGY as the stock returned 160.5% so far in Q2 (through June 10th) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.