The financial regulations require hedge funds and wealthy investors that crossed the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn't the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds' positions on June 28th. We at Insider Monkey have made an extensive database of nearly 750 of those established hedge funds and famous value investors' filings. In this article, we analyze how these elite funds and prominent investors traded Retail Opportunity Investments Corp (NASDAQ:ROIC) based on those filings.
Retail Opportunity Investments Corp (NASDAQ:ROIC) shareholders have witnessed an increase in activity from the world's largest hedge funds lately. ROIC was in 13 hedge funds' portfolios at the end of the second quarter of 2019. There were 8 hedge funds in our database with ROIC positions at the end of the previous quarter. Our calculations also showed that ROIC 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.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
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 look at the recent hedge fund action surrounding Retail Opportunity Investments Corp (NASDAQ:ROIC).
Hedge fund activity in Retail Opportunity Investments Corp (NASDAQ:ROIC)
At the end of the second quarter, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 63% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards ROIC over the last 16 quarters. With hedgies' capital changing hands, there exists a few key hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Ken Heebner's Capital Growth Management has the number one position in Retail Opportunity Investments Corp (NASDAQ:ROIC), worth close to $35.4 million, corresponding to 2.5% of its total 13F portfolio. The second most bullish fund manager is Dmitry Balyasny of Balyasny Asset Management, with a $21.6 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Some other members of the smart money that hold long positions comprise Clint Carlson's Carlson Capital, Renaissance Technologies and John Overdeck and David Siegel's Two Sigma Advisors.
As aggregate interest increased, key money managers have jumped into Retail Opportunity Investments Corp (NASDAQ:ROIC) headfirst. Carlson Capital, managed by Clint Carlson, created the largest position in Retail Opportunity Investments Corp (NASDAQ:ROIC). Carlson Capital had $17.8 million invested in the company at the end of the quarter. Richard Driehaus's Driehaus Capital also made a $0.6 million investment in the stock during the quarter. The following funds were also among the new ROIC investors: Mario Gabelli's GAMCO Investors, Gavin Saitowitz and Cisco J. del Valle's Springbok Capital, and Steve Cohen's Point72 Asset Management.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Retail Opportunity Investments Corp (NASDAQ:ROIC) but similarly valued. We will take a look at International Speedway Corporation (NASDAQ:ISCA), LexinFintech Holdings Ltd. (NASDAQ:LX), Builders FirstSource, Inc. (NASDAQ:BLDR), and ProAssurance Corporation (NYSE:PRA). All of these stocks' market caps are similar to ROIC's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ISCA,14,170355,-5 LX,15,77654,2 BLDR,35,418210,-2 PRA,15,183901,1 Average,19.75,212530,-1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.75 hedge funds with bullish positions and the average amount invested in these stocks was $213 million. That figure was $110 million in ROIC's case. Builders FirstSource, Inc. (NASDAQ:BLDR) is the most popular stock in this table. On the other hand International Speedway Corporation (NASDAQ:ISCA) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks Retail Opportunity Investments Corp (NASDAQ:ROIC) is even less popular than ISCA. Hedge funds clearly dropped the ball on ROIC as the stock delivered strong returns, though hedge funds' consensus picks still generated respectable returns. 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. A small number of hedge funds were also right about betting on ROIC as the stock returned 7.6% during the third quarter and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.