Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren’t timid and registered double digit market beating gains. Financials, energy and industrial stocks aren’t doing great but many of the stocks that delivered strong returns since March are still going very strong and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment to Rockwell Medical Inc (NASDAQ:RMTI) changed recently.
Hedge fund interest in Rockwell Medical Inc (NASDAQ:RMTI) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that RMTI isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). At the end of this article we will also compare RMTI to other stocks including First Eagle Alternative Capital BDC, Inc. (NASDAQ:FCRD), Galmed Pharmaceuticals Ltd (NASDAQ:GLMD), and Armstrong Flooring, Inc. (NYSE:AFI) to get a better sense of its popularity.
Video: Watch our video about the top 5 most popular hedge fund stocks.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. With all of this in mind let’s analyze the new hedge fund action regarding Rockwell Medical Inc (NASDAQ:RMTI).
What have hedge funds been doing with Rockwell Medical Inc (NASDAQ:RMTI)?
At the end of the third quarter, a total of 4 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. On the other hand, there were a total of 6 hedge funds with a bullish position in RMTI a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Sabby Capital, managed by Hal Mintz, holds the most valuable position in Rockwell Medical Inc (NASDAQ:RMTI). Sabby Capital has a $3.8 million position in the stock, comprising 0.6% of its 13F portfolio. Coming in second is Renaissance Technologies, with a $0.3 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other professional money managers that are bullish include Ken Griffin’s Citadel Investment Group, Peter Algert’s Algert Global and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Sabby Capital allocated the biggest weight to Rockwell Medical Inc (NASDAQ:RMTI), around 0.57% of its 13F portfolio. Algert Global is also relatively very bullish on the stock, designating 0.01 percent of its 13F equity portfolio to RMTI.
Because Rockwell Medical Inc (NASDAQ:RMTI) has witnessed bearish sentiment from the smart money, it’s safe to say that there lies a certain “tier” of hedge funds that elected to cut their positions entirely by the end of the third quarter. Interestingly, Israel Englander’s Millennium Management cut the biggest position of all the hedgies tracked by Insider Monkey, valued at close to $0.1 million in stock, and John Overdeck and David Siegel’s Two Sigma Advisors was right behind this move, as the fund said goodbye to about $0 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Rockwell Medical Inc (NASDAQ:RMTI) but similarly valued. We will take a look at First Eagle Alternative Capital BDC, Inc. (NASDAQ:FCRD), Galmed Pharmaceuticals Ltd (NASDAQ:GLMD), Armstrong Flooring, Inc. (NYSE:AFI), Consumer Portfolio Services, Inc. (NASDAQ:CPSS), Issuer Direct Corporation (NYSE:ISDR), Kitov Pharma Ltd. (NASDAQ:KTOV), and Hill International Inc (NYSE:HIL). This group of stocks’ market caps are closest to RMTI’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 5.9 hedge funds with bullish positions and the average amount invested in these stocks was $11 million. That figure was $4 million in RMTI’s case. Armstrong Flooring, Inc. (NYSE:AFI) is the most popular stock in this table. On the other hand Consumer Portfolio Services, Inc. (NASDAQ:CPSS) is the least popular one with only 1 bullish hedge fund positions. Rockwell Medical Inc (NASDAQ:RMTI) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for RMTI is 29.5. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through November 27th and surpassed the market again by 16.1 percentage points. Unfortunately RMTI wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); RMTI investors were disappointed as the stock returned -1.9% since the end of September (through 11/27) 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 most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.