Many investors, including Paul Tudor Jones or Stan Druckenmiller, have been saying before the Q4 market crash that the stock market is overvalued due to a low interest rate environment that leads to companies swapping their equity for debt and focusing mostly on short-term performance such as beating the quarterly earnings estimates. In the fourth quarter, many investors lost money due to unpredictable events such as the sudden increase in long-term interest rates and unintended consequences of the trade war with China. Nevertheless, many of the stocks that tanked in the fourth quarter still sport strong fundamentals and their decline was more related to the general market sentiment rather than their individual performance and hedge funds kept their bullish stance. In this article we will find out how hedge fund sentiment to RealPage, Inc. (NASDAQ:RP) changed recently.
RealPage, Inc. (NASDAQ:RP) was in 21 hedge funds' portfolios at the end of December. RP investors should be aware of a decrease in hedge fund sentiment in recent months. There were 27 hedge funds in our database with RP positions at the end of the previous quarter. Our calculations also showed that RP isn't among the 30 most popular stocks among hedge funds.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 20.7% year to date (through March 12th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 32 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
[caption id="attachment_324853" align="aligncenter" width="600"] Joshua Friedman of Canyon Capital[/caption]
We're going to take a look at the new hedge fund action regarding RealPage, Inc. (NASDAQ:RP).
What have hedge funds been doing with RealPage, Inc. (NASDAQ:RP)?
At Q4's end, a total of 21 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -22% from the previous quarter. The graph below displays the number of hedge funds with bullish position in RP over the last 14 quarters. With hedgies' sentiment swirling, there exists a few noteworthy hedge fund managers who were upping their holdings substantially (or already accumulated large positions).
According to Insider Monkey's hedge fund database, Stockbridge Partners, managed by Sharlyn C. Heslam, holds the most valuable position in RealPage, Inc. (NASDAQ:RP). Stockbridge Partners has a $170.2 million position in the stock, comprising 7.7% of its 13F portfolio. The second largest stake is held by Echo Street Capital Management, managed by Greg Poole, which holds a $57.8 million position; the fund has 1.5% of its 13F portfolio invested in the stock. Some other members of the smart money with similar optimism contain Dennis Puri and Oliver Keller's Hunt Lane Capital, Panayotis Takis Sparaggis's Alkeon Capital Management and Israel Englander's Millennium Management.
Seeing as RealPage, Inc. (NASDAQ:RP) has faced declining sentiment from the aggregate hedge fund industry, it's safe to say that there exists a select few hedgies that decided to sell off their full holdings in the third quarter. It's worth mentioning that Clint Carlson's Carlson Capital dumped the largest investment of the 700 funds watched by Insider Monkey, totaling an estimated $26.9 million in stock, and Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital was right behind this move, as the fund sold off about $16.6 million worth. These moves are important to note, as total hedge fund interest was cut by 6 funds in the third quarter.
Let's now review hedge fund activity in other stocks similar to RealPage, Inc. (NASDAQ:RP). These stocks are Hanesbrands Inc. (NYSE:HBI), TFS Financial Corporation (NASDAQ:TFSL), The Stars Group Inc. (NASDAQ:TSG), and Wyndham Hotels & Resorts, Inc. (NYSE:WH). This group of stocks' market values are similar to RP's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HBI,28,310452,10 TFSL,7,137225,-2 TSG,40,582898,-12 WH,37,834677,-2 Average,28,466313,-1.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 28 hedge funds with bullish positions and the average amount invested in these stocks was $466 million. That figure was $344 million in RP's case. The Stars Group Inc. (NASDAQ:TSG) is the most popular stock in this table. On the other hand TFS Financial Corporation (NASDAQ:TFSL) is the least popular one with only 7 bullish hedge fund positions. RealPage, Inc. (NASDAQ:RP) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. A small number of hedge funds were also right about betting on RP as the stock returned 31.4% and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.