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Last year we predicted the arrival of the first US recession since 2009 and we told in advance that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards B. Riley Financial, Inc. (NASDAQ:RILY).
Is B. Riley Financial, Inc. (NASDAQ:RILY) an exceptional investment now? Prominent investors were taking a bearish view. The number of bullish hedge fund bets fell by 1 lately. B. Riley Financial, Inc. (NASDAQ:RILY) was in 24 hedge funds' portfolios at the end of June. The all time high for this statistic is 25. Our calculations also showed that RILY isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 25 hedge funds in our database with RILY positions at the end of the first quarter.
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 79 percentage points since March 2017 (see the details here). That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Fred DiSanto of Ancora Advisors
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Now let's take a peek at the key hedge fund action regarding B. Riley Financial, Inc. (NASDAQ:RILY).
Do Hedge Funds Think RILY Is A Good Stock To Buy Now?
At the end of the second quarter, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -4% from the previous quarter. The graph below displays the number of hedge funds with bullish position in RILY over the last 24 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Royce & Associates, managed by Chuck Royce, holds the most valuable position in B. Riley Financial, Inc. (NASDAQ:RILY). Royce & Associates has a $36.9 million position in the stock, comprising 0.3% of its 13F portfolio. On Royce & Associates's heels is Paul Tudor Jones of Tudor Investment Corp, with a $27 million position; 0.5% of its 13F portfolio is allocated to the company. Some other hedge funds and institutional investors that are bullish include Brett Hendrickson's Nokomis Capital, and Frederick DiSanto's Ancora Advisors. In terms of the portfolio weights assigned to each position Nokomis Capital allocated the biggest weight to B. Riley Financial, Inc. (NASDAQ:RILY), around 6.1% of its 13F portfolio. Cruiser Capital Advisors is also relatively very bullish on the stock, designating 3.16 percent of its 13F equity portfolio to RILY.
Judging by the fact that B. Riley Financial, Inc. (NASDAQ:RILY) has faced falling interest from hedge fund managers, we can see that there lies a certain "tier" of money managers that decided to sell off their full holdings last quarter. It's worth mentioning that Steven Ng and Andrew Mitchell's Ophir Asset Management said goodbye to the biggest investment of all the hedgies watched by Insider Monkey, totaling an estimated $17.1 million in stock. Ravi Chopra's fund, Azora Capital, also dropped its stock, about $14.6 million worth. These transactions are interesting, as total hedge fund interest dropped by 1 funds last quarter.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as B. Riley Financial, Inc. (NASDAQ:RILY) but similarly valued. These stocks are BancFirst Corporation (NASDAQ:BANF), Workhorse Group, Inc. (NASDAQ:WKHS), Bionano Genomics, Inc. (NASDAQ:BNGO), Community Health Systems, Inc. (NYSE:CYH), DiamondRock Hospitality Company (NYSE:DRH), Cavco Industries, Inc. (NASDAQ:CVCO), and Kadant Inc. (NYSE:KAI). This group of stocks' market valuations are closest to RILY's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BANF,7,10680,3 WKHS,13,60261,-3 BNGO,17,40555,7 CYH,25,301172,4 DRH,12,95478,1 CVCO,20,187672,-2 KAI,10,98716,1 Average,14.9,113505,1.6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.9 hedge funds with bullish positions and the average amount invested in these stocks was $114 million. That figure was $146 million in RILY's case. Community Health Systems, Inc. (NYSE:CYH) is the most popular stock in this table. On the other hand BancFirst Corporation (NASDAQ:BANF) is the least popular one with only 7 bullish hedge fund positions. B. Riley Financial, Inc. (NASDAQ:RILY) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for RILY is 80. 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. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through October 22nd and beat the market again by 1.6 percentage points. Unfortunately RILY wasn't nearly as popular as these 5 stocks and hedge funds that were betting on RILY were disappointed as the stock returned -14.9% since the end of June (through 10/22) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.