There are several ways to beat the market, and investing in small cap stocks has historically been one of them. We like to improve the odds of beating the market further by examining what famous hedge fund operators such as Jeff Ubben, George Soros and Carl Icahn think. Those hedge fund operators make billions of dollars each year by hiring the best and the brightest to do research on stocks, including small cap stocks that big brokerage houses simply don't cover. Because of Carl Icahn and other elite funds' exemplary historical records, we pay attention to their small cap picks. In this article, we use hedge fund filing data to analyze Rudolph Technologies Inc (NYSE:RTEC).
Is Rudolph Technologies Inc (NYSE:RTEC) the right pick for your portfolio? Investors who are in the know are in a bearish mood. The number of long hedge fund bets went down by 4 in recent months. Our calculations also showed that RTEC isn't among the 30 most popular stocks among hedge funds (see the video below). Video: Click the image to 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 hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (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 25.7% through September 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let's take a glance at the latest hedge fund action encompassing Rudolph Technologies Inc (NYSE:RTEC).
What have hedge funds been doing with Rudolph Technologies Inc (NYSE:RTEC)?
At the end of the second quarter, a total of 8 of the hedge funds tracked by Insider Monkey were long this stock, a change of -33% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards RTEC over the last 16 quarters. With the smart money's sentiment swirling, there exists an "upper tier" of key hedge fund managers who were upping their stakes significantly (or already accumulated large positions).
According to Insider Monkey's hedge fund database, Renaissance Technologies holds the most valuable position in Rudolph Technologies Inc (NYSE:RTEC). Renaissance Technologies has a $30.1 million position in the stock, comprising less than 0.1%% of its 13F portfolio. The second most bullish fund manager is Royce & Associates, led by Chuck Royce, holding a $23.9 million position; 0.2% of its 13F portfolio is allocated to the company. Other peers with similar optimism encompass D. E. Shaw's D E Shaw, Cliff Asness's AQR Capital Management and Richard S. Meisenberg's ACK Asset Management.
Judging by the fact that Rudolph Technologies Inc (NYSE:RTEC) has experienced 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 full holdings by the end of the second quarter. Interestingly, Ken Griffin's Citadel Investment Group said goodbye to the largest position of all the hedgies tracked by Insider Monkey, comprising an estimated $2.2 million in stock, and Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital was right behind this move, as the fund dumped about $0.9 million worth. These transactions are interesting, as total hedge fund interest dropped by 4 funds by the end of the second quarter.
Let's also examine hedge fund activity in other stocks similar to Rudolph Technologies Inc (NYSE:RTEC). These stocks are TiVo Corporation (NASDAQ:TIVO), Principia Biopharma Inc. (NASDAQ:PRNB), Lindsay Corporation (NYSE:LNN), and CNX Midstream Partners LP (NYSE:CNXM). All of these stocks' market caps are similar to RTEC's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TIVO,19,109995,0 PRNB,12,225860,1 LNN,6,175783,-1 CNXM,5,12359,-2 Average,10.5,130999,-0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.5 hedge funds with bullish positions and the average amount invested in these stocks was $131 million. That figure was $93 million in RTEC's case. TiVo Corporation (NASDAQ:TIVO) is the most popular stock in this table. On the other hand CNX Midstream Partners LP (NYSE:CNXM) is the least popular one with only 5 bullish hedge fund positions. Rudolph Technologies Inc (NYSE:RTEC) is not the least popular stock in this group but hedge fund interest is still below average. 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately RTEC wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); RTEC investors were disappointed as the stock returned -4.6% during the third quarter 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 in 2019.
Disclosure: None. This article was originally published at Insider Monkey.