Should You Go Long RMG Networks Holding Corporation (RMGN)?

Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track more than 700 prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile gigantic failures like hedge funds’ recent losses in Valeant. Let’s take a closer look at what the funds we track think about RMG Networks Holding Corporation (NASDAQ:RMGN) in this article.

RMG Networks Holding Corporation (NASDAQ:RMGN) has experienced a decrease in the hedge fund interest of late. 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 Broadwind Energy Inc. (NASDAQ:BWEN), Resolute Energy Corp (NYSE:REN), and China Techfaith Wireless Comm. Tech. Ltd (NASDAQ:CNTF) to gather more data points.

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In the 21st century investor’s toolkit there are a large number of gauges shareholders employ to assess stocks. A couple of the most under-the-radar gauges are hedge fund and insider trading moves. our researchers have shown that, historically, those who follow the best picks of the best investment managers can outperform the broader indices by a very impressive amount (see the details here).

With all of this in mind, let’s take a gander at the latest action regarding RMG Networks Holding Corporation (NASDAQ:RMGN).

How are hedge funds trading RMG Networks Holding Corporation (NASDAQ:RMGN)?

At the end of September, a total of 5 of the hedge funds tracked by Insider Monkey were long in this stock, flat over the second quarter. With the smart money’s capital changing hands, there exists an “upper tier” of notable hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).

When looking at the hedgies followed by Insider Monkey, Paul Reeder and Edward Shapiro’s PAR Capital Management had the biggest position in RMG Networks Holding Corporation (NASDAQ:RMGN), worth close to $2.9 million, comprising 0.1% of its total 13F portfolio. On PAR Capital Management’s heels is John Thiessen of Vertex One Asset Management, with a $0.8 million position; 0.1% of its 13F portfolio is allocated to the stock. Remaining members of the smart money with similar optimism consist of Kelly Cardwell’s Central Square Management, Renaissance Technologies and Ken Griffin’s Citadel Investment Group.

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 take a look at hedge fund activity in other stocks – not necessarily in the same industry as RMG Networks Holding Corporation (NASDAQ:RMGN) but similarly valued. These stocks are Broadwind Energy Inc. (NASDAQ:BWEN), Resolute Energy Corp (NYSE:REN), China Techfaith Wireless Comm. Tech. Ltd (NASDAQ:CNTF), and Gevo, Inc. (NASDAQ:GEVO). This group of stocks’ market values match RMG Networks Holding Corporation (NASDAQ:RMGN)’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BWEN 4 4128 -2
REN 9 11327 -6
CNTF 4 616 0
GEVO 7 10893 1

As you can see these stocks had an average of 6 hedge funds with bullish positions and the average amount invested in these stocks was $7 million. That figure was $4 millions in RMG Networks Holding Corporation (NASDAQ:RMGN)’s case. Resolute Energy Corp (NYSE:REN) is the most popular stock in this table. On the other hand, Broadwind Energy Inc. (NASDAQ:BWEN) is the least popular one with only four bullish hedge fund positions. RMG Networks Holding Corporation (NASDAQ:RMGN) 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. Therefore, other stocks might represent better alternatives to invest in, but a further analysis is required.