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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 Ring Energy Inc (NYSE:REI).
Is Ring Energy Inc (NYSE:REI) a buy right now? Prominent investors are getting less optimistic. The number of bullish hedge fund bets went down by 4 in recent months. Our calculations also showed that REI 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.
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 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
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Fred DiSanto of Ancora Advisors[/caption]
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. Keeping this in mind let's take a look at the recent hedge fund action surrounding Ring Energy Inc (NYSE:REI).
How have hedgies been trading Ring Energy Inc (NYSE:REI)?
At Q1's end, a total of 6 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -40% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards REI over the last 18 quarters. With hedgies' capital changing hands, there exists an "upper tier" of key hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Renaissance Technologies, holds the biggest position in Ring Energy Inc (NYSE:REI). Renaissance Technologies has a $0.3 million position in the stock, comprising less than 0.1%% of its 13F portfolio. On Renaissance Technologies's heels is Arrowstreet Capital, led by Peter Rathjens, Bruce Clarke and John Campbell, holding a $0.1 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Other peers that are bullish comprise Frederick DiSanto's Ancora Advisors, Chuck Royce's Royce & Associates and Gavin Saitowitz and Cisco J. del Valle's Springbok Capital. In terms of the portfolio weights assigned to each position Ancora Advisors allocated the biggest weight to Ring Energy Inc (NYSE:REI), around 0.01% of its 13F portfolio. Springbok Capital is also relatively very bullish on the stock, earmarking 0.0017 percent of its 13F equity portfolio to REI.
Because Ring Energy Inc (NYSE:REI) has witnessed declining sentiment from the aggregate hedge fund industry, it's safe to say that there is a sect of hedgies that elected to cut their positions entirely last quarter. Interestingly, Ken Fisher's Fisher Asset Management said goodbye to the largest stake of the 750 funds followed by Insider Monkey, valued at close to $0.9 million in stock, and Israel Englander's Millennium Management was right behind this move, as the fund dumped about $0.5 million worth. These moves are important to note, as aggregate hedge fund interest was cut by 4 funds last quarter.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Ring Energy Inc (NYSE:REI) but similarly valued. These stocks are Elevate Credit, Inc. (NYSE:ELVT), Performant Financial Corp (NASDAQ:PFMT), Milestone Pharmaceuticals Inc. (NASDAQ:MIST), and Home Federal Bancorp Inc of Louisiana (NASDAQ:HFBL). All of these stocks' market caps are closest to REI's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ELVT,12,3291,1 PFMT,3,12188,-1 MIST,5,958,-2 HFBL,1,637,0 Average,5.25,4269,-0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 5.25 hedge funds with bullish positions and the average amount invested in these stocks was $4 million. That figure was $1 million in REI's case. Elevate Credit, Inc. (NYSE:ELVT) is the most popular stock in this table. On the other hand Home Federal Bancorp Inc of Louisiana (NASDAQ:HFBL) is the least popular one with only 1 bullish hedge fund positions. Ring Energy Inc (NYSE:REI) is not the most popular stock in this group but hedge fund interest is still above average. 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 but still beat the market by 14.2 percentage points. Hedge funds were also right about betting on REI as the stock returned 156.1% in Q2 (through June 10th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.