How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Rubicon Technology, Inc. (NASDAQ:RBCN).
Rubicon Technology, Inc. (NASDAQ:RBCN) investors should pay attention to a decrease in enthusiasm from smart money in recent months. Rubicon Technology, Inc. (NASDAQ:RBCN) was in 3 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 5. Our calculations also showed that RBCN 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).
Video: Watch our video about the top 5 most popular hedge fund stocks.
To the average investor there are a multitude of indicators stock traders use to analyze their holdings. Some of the most under-the-radar indicators are hedge fund and insider trading moves. Our researchers have shown that, historically, those who follow the top picks of the elite money managers can outpace the S&P 500 by a significant amount (see the details here).
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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind we’re going to analyze the new hedge fund action surrounding Rubicon Technology, Inc. (NASDAQ:RBCN).
How are hedge funds trading Rubicon Technology, Inc. (NASDAQ:RBCN)?
Heading into the fourth quarter of 2020, a total of 3 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -25% from the previous quarter. The graph below displays the number of hedge funds with bullish position in RBCN over the last 21 quarters. With hedgies’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Gregory Bylinsky and Jefferson Gramm’s Bandera Partners has the most valuable position in Rubicon Technology, Inc. (NASDAQ:RBCN), worth close to $2.2 million, corresponding to 1.4% of its total 13F portfolio. The second largest stake is held by Renaissance Technologies, holding a $1 million position; less than 0.1%% of its 13F portfolio is allocated to the company. In terms of the portfolio weights assigned to each position Bandera Partners allocated the biggest weight to Rubicon Technology, Inc. (NASDAQ:RBCN), around 1.43% of its 13F portfolio. Ariel Investments is also relatively very bullish on the stock, earmarking 0.01 percent of its 13F equity portfolio to RBCN.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Roumell Asset Management. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because none of the 750+ hedge funds tracked by Insider Monkey identified RBCN as a viable investment and initiated a position in the stock.
Let’s check out hedge fund activity in other stocks similar to Rubicon Technology, Inc. (NASDAQ:RBCN). We will take a look at AzurRx BioPharma, Inc. (NASDAQ:AZRX), Westell Technologies Inc. (NASDAQ:WSTL), CVD Equipment Corporation (NASDAQ:CVV), Castor Maritime Inc. (NASDAQ:CTRM), Capital Senior Living Corporation (NYSE:CSU), Histogen Inc. (NASDAQ:HSTO), and ZK International Group Co., Ltd. (NASDAQ:ZKIN). This group of stocks’ market caps are similar to RBCN’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 1.7 hedge funds with bullish positions and the average amount invested in these stocks was $1 million. That figure was $4 million in RBCN’s case. Capital Senior Living Corporation (NYSE:CSU) is the most popular stock in this table. On the other hand AzurRx BioPharma, Inc. (NASDAQ:AZRX) is the least popular one with only 1 bullish hedge fund positions. Rubicon Technology, Inc. (NASDAQ:RBCN) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for RBCN is 55.3. 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 positive signal but 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 28.1% in 2020 through November 23rd and beat the market again by 15.4 percentage points. Unfortunately RBCN wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on RBCN were disappointed as the stock returned 4.7% since the end of September (through 11/23) 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 many of these stocks already outperformed the market so far this year.
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Disclosure: None. This article was originally published at Insider Monkey.