Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors' consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Re/Max Holdings Inc (NYSE:RMAX).
Is Re/Max Holdings Inc (NYSE:RMAX) a buy right now? The best stock pickers are becoming less hopeful. The number of long hedge fund bets retreated by 11 in recent months. Our calculations also showed that RMAX 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.
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 58 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 leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let's check out the key hedge fund action encompassing Re/Max Holdings Inc (NYSE:RMAX).
How have hedgies been trading Re/Max Holdings Inc (NYSE:RMAX)?
Heading into the second quarter of 2020, a total of 6 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -65% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards RMAX over the last 18 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Re/Max Holdings Inc (NYSE:RMAX) was held by Renaissance Technologies, which reported holding $27.9 million worth of stock at the end of September. It was followed by Millennium Management with a $2.2 million position. Other investors bullish on the company included Winton Capital Management, AQR Capital Management, and Okumus Fund Management. In terms of the portfolio weights assigned to each position Okumus Fund Management allocated the biggest weight to Re/Max Holdings Inc (NYSE:RMAX), around 0.61% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, designating 0.03 percent of its 13F equity portfolio to RMAX.
Seeing as Re/Max Holdings Inc (NYSE:RMAX) has faced a decline in interest from the aggregate hedge fund industry, it's easy to see that there lies a certain "tier" of hedgies who sold off their full holdings in the first quarter. At the top of the heap, Paul Marshall and Ian Wace's Marshall Wace LLP sold off the largest position of the 750 funds followed by Insider Monkey, valued at an estimated $7 million in stock, and Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital was right behind this move, as the fund dumped about $3.8 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest was cut by 11 funds in the first quarter.
Let's now take a look at hedge fund activity in other stocks similar to Re/Max Holdings Inc (NYSE:RMAX). We will take a look at OrthoPediatrics Corp. (NASDAQ:KIDS), Mr. Cooper Group Inc. (NASDAQ:COOP), Nordic American Tankers Ltd (NYSE:NAT), and Photronics, Inc. (NASDAQ:PLAB). This group of stocks' market valuations are similar to RMAX's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position KIDS,7,43469,-4 COOP,19,177754,-4 NAT,12,25618,-2 PLAB,22,89664,1 Average,15,84126,-2.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $84 million. That figure was $32 million in RMAX's case. Photronics, Inc. (NASDAQ:PLAB) is the most popular stock in this table. On the other hand OrthoPediatrics Corp. (NASDAQ:KIDS) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Re/Max Holdings Inc (NYSE:RMAX) is even less popular than KIDS. Hedge funds clearly dropped the ball on RMAX as the stock delivered strong returns, though hedge funds' consensus picks still generated respectable returns. 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 13.9% in 2020 through June 10th and still beat the market by 14.2 percentage points. A small number of hedge funds were also right about betting on RMAX as the stock returned 52.7% so far in the second quarter and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.