Should You Follow Hedge Funds and Dump Rimini Street, Inc. (RMNI)?

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 Rimini Street, Inc. (NASDAQ:RMNI).

Is Rimini Street, Inc. (NASDAQ:RMNI) worth your attention right now? Prominent investors are becoming less hopeful. The number of long hedge fund positions were cut by 2 in recent months. Our calculations also showed that RMNI isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). RMNI was in 4 hedge funds’ portfolios at the end of the third quarter of 2019. There were 6 hedge funds in our database with RMNI positions at the end of the previous quarter.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

According to most traders, hedge funds are viewed as unimportant, old financial tools of yesteryear. While there are more than 8000 funds in operation at the moment, Our experts choose to focus on the upper echelon of this group, approximately 750 funds. These money managers handle the majority of the smart money’s total capital, and by paying attention to their unrivaled investments, Insider Monkey has discovered numerous investment strategies that have historically beaten the broader indices. Insider Monkey’s flagship short hedge fund strategy surpassed the S&P 500 short ETFs by around 20 percentage points per annum 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 .

Millennium Management, Catapult Capital Management

Israel Englander of Millennium Management

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 let’s view the key hedge fund action surrounding Rimini Street, Inc. (NASDAQ:RMNI).

What have hedge funds been doing with Rimini Street, Inc. (NASDAQ:RMNI)?

Heading into the fourth quarter of 2019, a total of 4 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -33% from the previous quarter. On the other hand, there were a total of 3 hedge funds with a bullish position in RMNI a year ago. With the smart money’s sentiment swirling, there exists an “upper tier” of key hedge fund managers who were upping their holdings significantly (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Brett Hendrickson’s Nokomis Capital has the number one position in Rimini Street, Inc. (NASDAQ:RMNI), worth close to $6.8 million, comprising 1.5% of its total 13F portfolio. The second largest stake is held by Kingstown Capital Management, managed by Michael Blitzer, which holds a $4.4 million position; the fund has 1.1% of its 13F portfolio invested in the stock. Some other members of the smart money that are bullish comprise Renaissance Technologies, Israel Englander’s Millennium Management and . In terms of the portfolio weights assigned to each position Nokomis Capital allocated the biggest weight to Rimini Street, Inc. (NASDAQ:RMNI), around 1.48% of its 13F portfolio. Kingstown Capital Management is also relatively very bullish on the stock, dishing out 1.09 percent of its 13F equity portfolio to RMNI.

Because Rimini Street, Inc. (NASDAQ:RMNI) has experienced falling interest from hedge fund managers, logic holds that there were a few hedge funds who were dropping their entire stakes last quarter. At the top of the heap, Paul Marshall and Ian Wace’s Marshall Wace dumped the largest investment of the 750 funds tracked by Insider Monkey, valued at an estimated $0.1 million in stock, and Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital was right behind this move, as the fund said goodbye to about $0 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest was cut by 2 funds last quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Rimini Street, Inc. (NASDAQ:RMNI) but similarly valued. These stocks are SmartFinancial, Inc. (NASDAQ:SMBK), CapStar Financial Holdings, Inc. (NASDAQ:CSTR), Veritiv Corp (NYSE:VRTV), and Seneca Foods Corp (NASDAQ:SENEA). This group of stocks’ market valuations resemble RMNI’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SMBK 7 29723 2
CSTR 8 12324 4
VRTV 11 74905 2
SENEA 5 16044 2
Average 7.75 33249 2.5

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 $33 million. That figure was $13 million in RMNI’s case. Veritiv Corp (NYSE:VRTV) is the most popular stock in this table. On the other hand Seneca Foods Corp (NASDAQ:SENEA) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Rimini Street, Inc. (NASDAQ:RMNI) is even less popular than SENEA. Hedge funds dodged a bullet by taking a bearish stance towards RMNI. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately RMNI wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); RMNI investors were disappointed as the stock returned -9.4% during the fourth quarter (through the end of November) 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 so far in Q4.

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