Were Hedge Funds Right About Reading International, Inc. (RDI)?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Reading International, Inc. (NASDAQ:RDI) based on that data and determine whether they were really smart about the stock.

Reading International, Inc. (NASDAQ:RDI) shareholders have witnessed an increase in activity from the world’s largest hedge funds of late. Our calculations also showed that RDI 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.

In the 21st century investor’s toolkit there are many metrics stock market investors employ to value stocks. A pair of the best metrics are hedge fund and insider trading interest. We have shown that, historically, those who follow the best picks of the best investment managers can outpace the market by a significant margin (see the details here).

Donald Yacktman of Yacktman Asset Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s take a peek at the key hedge fund action surrounding Reading International, Inc. (NASDAQ:RDI).

Hedge fund activity in Reading International, Inc. (NASDAQ:RDI)

Heading into the second quarter of 2020, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 9% from one quarter earlier. On the other hand, there were a total of 6 hedge funds with a bullish position in RDI a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).

Among these funds, Yacktman Asset Management held the most valuable stake in Reading International, Inc. (NASDAQ:RDI), which was worth $3.4 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $3 million worth of shares. GAMCO Investors, Madison Avenue Partners, and Cove Street Capital 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 Madison Avenue Partners allocated the biggest weight to Reading International, Inc. (NASDAQ:RDI), around 0.44% of its 13F portfolio. Harspring Capital Management is also relatively very bullish on the stock, earmarking 0.2 percent of its 13F equity portfolio to RDI.

As industrywide interest jumped, key money managers have been driving this bullishness. Millennium Management, managed by Israel Englander, created the biggest position in Reading International, Inc. (NASDAQ:RDI). Millennium Management had $0.1 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also initiated a $0 million position during the quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Reading International, Inc. (NASDAQ:RDI) but similarly valued. These stocks are Tailored Brands, Inc. (NYSE:TLRD), Servicesource International Inc (NASDAQ:SREV), Postal Realty Trust, Inc. (NYSE:PSTL), and Frequency Electronics, Inc. (NASDAQ:FEIM). This group of stocks’ market values are closest to RDI’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TLRD 6 9030 -6
SREV 12 20636 -2
PSTL 4 18028 0
FEIM 3 8954 0
Average 6.25 14162 -2

View table here if you experience formatting issues.

As you can see these stocks had an average of 6.25 hedge funds with bullish positions and the average amount invested in these stocks was $14 million. That figure was $10 million in RDI’s case. Servicesource International Inc (NASDAQ:SREV) is the most popular stock in this table. On the other hand Frequency Electronics, Inc. (NASDAQ:FEIM) is the least popular one with only 3 bullish hedge fund positions. Reading International, Inc. (NASDAQ:RDI) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 gained 12.3% in 2020 through June 30th but beat the market by 15.5 percentage points. Unfortunately RDI wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on RDI were disappointed as the stock returned 9.3% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

Follow Reading International Inc (NASDAQ:RDI)

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