Many investors, including Paul Tudor Jones or Stan Druckenmiller, have been saying for a while now that the current 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 third 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 RingCentral Inc (NYSE:RNG) changed recently.
RingCentral Inc (NYSE:RNG) was in 42 hedge funds' portfolios at the end of the third quarter of 2018. RNG has seen an increase in hedge fund sentiment recently. There were 40 hedge funds in our database with RNG holdings at the end of the previous quarter. Our calculations also showed that RNG isn't among the 30 most popular stocks among hedge funds.
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 18 percentage points since May 2014 through December 3, 2018 (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 24% through December 3, 2018. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We're going to go over the latest hedge fund action regarding RingCentral Inc (NYSE:RNG).
What does the smart money think about RingCentral Inc (NYSE:RNG)?
At Q3's end, a total of 42 of the hedge funds tracked by Insider Monkey were long this stock, a change of 5% from the second quarter of 2018. The graph below displays the number of hedge funds with bullish position in RNG over the last 13 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Alkeon Capital Management was the largest shareholder of RingCentral Inc (NYSE:RNG), with a stake worth $170.7 million reported as of the end of September. Trailing Alkeon Capital Management was Whale Rock Capital Management, which amassed a stake valued at $132.8 million. Renaissance Technologies, Millennium Management, and Arrowstreet Capital were also very fond of the stock, giving the stock large weights in their portfolios.
As industrywide interest jumped, specific money managers were breaking ground themselves. Moore Global Investments, managed by Louis Bacon, created the biggest position in RingCentral Inc (NYSE:RNG). Moore Global Investments had $13.5 million invested in the company at the end of the quarter. David Fiszel's Honeycomb Asset Management also made a $12.6 million investment in the stock during the quarter. The other funds with new positions in the stock are Leon Shaulov's Maplelane Capital, Paul Marshall and Ian Wace's Marshall Wace LLP, and Nehal Chopra's Ratan Capital Group.
Let's also examine hedge fund activity in other stocks similar to RingCentral Inc (NYSE:RNG). These stocks are Logitech International SA (NASDAQ:LOGI), Nutanix, Inc. (NASDAQ:NTNX), Ares Capital Corporation (NASDAQ:ARCC), and Hubbell Incorporated (NYSE:HUBB). This group of stocks' market values are similar to RNG's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LOGI,19,286411,3 NTNX,39,652637,5 ARCC,25,285375,2 HUBB,27,780075,5 Average,27.5,501125,3.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 27.5 hedge funds with bullish positions and the average amount invested in these stocks was $501 million. That figure was $1.08 billion in RNG's case. Nutanix, Inc. (NASDAQ:NTNX) is the most popular stock in this table. On the other hand Logitech International SA (NASDAQ:LOGI) is the least popular one with only 19 bullish hedge fund positions. Compared to these stocks RingCentral Inc (NYSE:RNG) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
Disclosure: None. This article was originally published at Insider Monkey.