What Hedge Funds Think about RSP Permian Inc (RSPP)?

Hedge fund managers like David Einhorn, Dan Loeb, or Carl Icahn became billionaires through reaping large profits for their investors, which is why piggybacking their stock picks may provide us with significant returns as well. Many hedge funds, like Paul Singer’s Elliott Management, are pretty secretive, but we can still get some insights by analyzing their quarterly 13F filings. One of the most fertile grounds for large abnormal returns is hedge funds’ most popular small-cap picks, which are not so widely followed and often trade at a discount to their intrinsic value. In this article we will check out hedge fund activity in another small-cap stock: RSP Permian Inc (NYSE:RSPP) .

RSP Permian Inc (NYSE:RSPP) investors should pay attention to an increase in support from the world’s most successful money managers during the third quarter. More specifically, 31 funds from our database held shares of the company at the end of September, compared to 26 funds a quarter earlier. At the end of this article we will also compare RSPP to other stocks including Bright Horizons Family Solutions Inc (NYSE:BFAM), Hudson Pacific Properties Inc (NYSE:HPP), and Fibria Celulose SA (ADR) (NYSE:FBR) 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.

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Keeping this in mind, we’re going to check out the fresh action regarding RSP Permian Inc (NYSE:RSPP).

How are hedge funds trading RSP Permian Inc (NYSE:RSPP)?

Heading into the fourth quarter of 2016, a total of 31 of the hedge funds tracked by Insider Monkey were long this stock, a change of 19% from the second quarter of 2016. By comparison, 23 hedge funds held shares or bullish call options in RSPP heading into 2016. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, John Labanowski’s Brenham Capital Management has the largest position in RSP Permian Inc (NYSE:RSPP), worth close to $124.1 million, accounting for 14.7% of its total 13F portfolio. The second most bullish fund is Ben Gambill’s Tiger Eye Capital, with a $22.3 million position; the fund has 2.8% of its 13F portfolio invested in the stock. Remaining professional money managers that are bullish consist of David Zusman’s Talara Capital Management and Kenneth Tropin’s Graham Capital Management. We should note that two of these hedge funds (Brenham Capital Management and Talara Capital Management) are 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.

With a general bullishness amongst the heavyweights, specific money managers have jumped into RSP Permian Inc (NYSE:RSPP) headfirst. Highland Capital Management, led by James Dondero, established the most valuable position in RSP Permian Inc (NYSE:RSPP). Highland Capital Management had $10.6 million invested in the company at the end of the quarter. Charles Clough’s Clough Capital Partners also initiated a $8.7 million position during the quarter. The other funds with new positions in the stock are John Overdeck and David Siegel’s Two Sigma Advisors, Israel Englander’s Millennium Management, and Charles Davidson’s Wexford Capital.

Let’s now review hedge fund activity in other stocks similar to RSP Permian Inc (NYSE:RSPP). We will take a look at Bright Horizons Family Solutions Inc (NYSE:BFAM), Hudson Pacific Properties Inc (NYSE:HPP), Fibria Celulose SA (ADR) (NYSE:FBR), and Cypress Semiconductor Corporation (NASDAQ:CY). This group of stocks’ market caps match RSPP’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BFAM 12 86899 -3
HPP 17 189409 -6
FBR 7 39986 -4
CY 31 366691 6

As you can see these stocks had an average of 17 funds with bullish positions and the average amount invested in these stocks was $171 million, compared to $286 million in RSPP’s case. Cypress Semiconductor Corporation (NASDAQ:CY) is the most popular stock in this table, while Fibria Celulose SA (ADR) (NYSE:FBR) is the least popular one with only seven bullish hedge fund positions. RSP Permian Inc (NYSE:RSPP) 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. In this regard Cypress Semiconductor Corporation (NASDAQ:CY) might be a better candidate to consider taking a long position in.

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