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Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 817 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds' 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about Reading International, Inc. (NASDAQ:RDI) in this article.
Is Reading International, Inc. (NASDAQ:RDI) an exceptional investment today? The smart money was turning less bullish. The number of bullish hedge fund bets retreated by 6 lately. Reading International, Inc. (NASDAQ:RDI) was in 8 hedge funds' portfolios at the end of September. The all time high for this statistics is 14. Our calculations also showed that RDI 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). There were 14 hedge funds in our database with RDI holdings at the end of June.
Video: Watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
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 15 best blue chip stocks 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. Now let's review the key hedge fund action surrounding Reading International, Inc. (NASDAQ:RDI).
How are hedge funds trading Reading International, Inc. (NASDAQ:RDI)?
At Q3's end, a total of 8 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -43% from one quarter earlier. By comparison, 7 hedge funds held shares or bullish call options in RDI a year ago. With hedge funds' capital changing hands, there exists a select group of noteworthy hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Wilmot B. Harkey and Daniel Mack's Nantahala Capital Management has the most valuable position in Reading International, Inc. (NASDAQ:RDI), worth close to $6.1 million, comprising 0.2% of its total 13F portfolio. On Nantahala Capital Management's heels is Donald Yacktman of Yacktman Asset Management, with a $2.8 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Some other professional money managers that are bullish encompass Renaissance Technologies, Mario Gabelli's GAMCO Investors and David Harding's Winton Capital Management. In terms of the portfolio weights assigned to each position Nantahala Capital Management allocated the biggest weight to Reading International, Inc. (NASDAQ:RDI), around 0.19% of its 13F portfolio. Elkhorn Partners is also relatively very bullish on the stock, dishing out 0.1 percent of its 13F equity portfolio to RDI.
Judging by the fact that Reading International, Inc. (NASDAQ:RDI) has faced a decline in interest from hedge fund managers, logic holds that there exists a select few fund managers that decided to sell off their positions entirely in the third quarter. Intriguingly, Donald Sussman's Paloma Partners dumped the largest stake of all the hedgies watched by Insider Monkey, totaling an estimated $0.2 million in stock. Nick Thakore's fund, Diametric Capital, also sold off its stock, about $0.1 million worth. These moves are interesting, as aggregate hedge fund interest dropped by 6 funds in the third quarter.
Let's check out hedge fund activity in other stocks similar to Reading International, Inc. (NASDAQ:RDI). We will take a look at SPI Energy Co., Ltd. (NASDAQ:SPI), Key Tronic Corporation (NASDAQ:KTCC), Eloxx Pharmaceuticals, Inc. (NASDAQ:ELOX), PC Tel Inc (NASDAQ:PCTI), Safe Bulkers, Inc. (NYSE:SB), Elevate Credit, Inc. (NYSE:ELVT), and Mesa Air Group, Inc. (NASDAQ:MESA). This group of stocks' market values match RDI's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SPI,1,3065,0 KTCC,1,1248,0 ELOX,1,157,0 PCTI,9,19681,-1 SB,6,5501,1 ELVT,10,6955,-3 MESA,10,16914,-1 Average,5.4,7646,-0.6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 5.4 hedge funds with bullish positions and the average amount invested in these stocks was $8 million. That figure was $12 million in RDI's case. Elevate Credit, Inc. (NYSE:ELVT) is the most popular stock in this table. On the other hand SPI Energy Co., Ltd. (NASDAQ:SPI) is the least popular one with only 1 bullish hedge fund positions. Reading International, Inc. (NASDAQ:RDI) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for RDI is 55. 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. 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 31.6% in 2020 through December 2nd and still beat the market by 16 percentage points. Hedge funds were also right about betting on RDI as the stock returned 13% since the end of Q3 (through 12/2) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.