Retail Opportunity Investments Corp (ROIC): Are Hedge Funds Right About This Stock?

There are several ways to beat the market, and investing in small cap stocks has historically been one of them. We like to improve the odds of beating the market further by examining what famous hedge fund operators such as Carl Icahn and George Soros think. Those hedge fund operators make billions of dollars each year by hiring the best and the brightest to do research on stocks, including small cap stocks that big brokerage houses simply don’t cover. Because of Carl Icahn and other successful funds’ exemplary historical records, we pay attention to their small cap picks. In this article, we use hedge fund filing data to analyze Retail Opportunity Investments Corp (NASDAQ:ROIC).

Is Retail Opportunity Investments Corp (NASDAQ:ROIC) going to take off soon? Money managers are definitely turning bullish. The number of bullish hedge fund bets that are revealed through the 13F filings inched up by 1 recently. There were 8 hedge funds in our database with ROIC positions at the end of September. At the end of this article we will also compare ROIC to other stocks including Weibo Corp (ADR) (NASDAQ:WB), Media General, Inc. (NYSE:MEG), and Northstar Realty Finance Corp. (NYSE:NRF) to get a better sense of its popularity.

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We follow over 700 hedge funds and other institutional investors and by analyzing their quarterly 13F filings, we identify stocks that they are collectively bullish on and develop investment strategies based on this data. One strategy that outperformed the market over the last year involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively most bullish on. Over the past year, this strategy generated returns of 18%, topping the 8% gain registered by S&P 500 ETFs. We launched this strategy 2.5 years ago and it returned more than 39% since then, vs. 22% gain registered by the S&P 500 ETFs.

REIT Stocks Northstar Realty Finance NRF

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What does the smart money think about Retail Opportunity Investments Corp (NASDAQ:ROIC)?

At the end of the third quarter, a total of 8 of the hedge funds tracked by Insider Monkey were bullish on this stock, a up by 14% from one quarter earlier. On the other hand, there were a total of 9 hedge funds with a bullish position in ROIC at the beginning of this year. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

ROIC Chart

Of the funds tracked by Insider Monkey, Ken Griffin’s Citadel Investment Group has the most valuable position in Retail Opportunity Investments Corp (NASDAQ:ROIC), worth close to $10.2 million. The second most bullish fund manager is Two Sigma Advisors, led by John Overdeck and David Siegel, which holds a $5 million position. Some other hedge funds and institutional investors that are bullish contain Cliff Asness’ AQR Capital Management, J. Alan Reid, Jr.’s Forward Management and Millennium Management, one of the 10 largest hedge funds in the world. We should note that Forward Management is among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

As one would reasonably expect, key hedge funds have been driving this bullishness. Navellier & Associates, led by Louis Navellier, established the largest position in Retail Opportunity Investments Corp (NASDAQ:ROIC). Navellier & Associates had $0.9 million invested in the company at the end of the quarter. Jim Simons’ Renaissance Technologies also made a $0.5 million investment in the stock during the quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Retail Opportunity Investments Corp (NASDAQ:ROIC) but similarly valued. We will take a look at Weibo Corp (ADR) (NASDAQ:WB), Media General, Inc. (NYSE:MEG), Northstar Realty Finance Corp. (NYSE:NRF), and Verint Systems Inc. (NASDAQ:VRNT). This group of stocks’ market valuations are similar to ROIC’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
WB 29 201128 17
MEG 31 750847 -3
NRF 32 315398 0
VRNT 21 294430 0

As you can see these stocks had an average of 28 hedge funds with bullish positions and the average amount invested in these stocks was $390 million. That figure was $26 million in ROIC’s case. Northstar Realty Finance Corp. (NYSE:NRF) is the most popular stock in this table. On the other hand Verint Systems Inc. (NASDAQ:VRNT) is the least popular one with only 21 bullish hedge fund positions. Compared to these stocks Retail Opportunity Investments Corp (NASDAQ:ROIC) is even less popular than VRNT. 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.

Disclosure: None