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Hedge Funds Have Never Been This Bullish On Retail Value Inc. (RVI)

Abigail Fisher

The market has been volatile in the last 6 months as the Federal Reserve continued its rate hikes and then abruptly reversed its stance and uncertainty looms over trade negotiations with China. Small cap stocks have been hit hard as a result, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by nearly 9 percentage points. SEC filings and hedge fund investor letters indicate that the smart money seems to be paring back their overall long exposure since summer months, though some funds increased their exposure dramatically at the end of Q4 and the beginning of Q1. In this article, we analyze what the smart money thinks of Retail Value Inc. (NYSE:RVI) and find out how it is affected by hedge funds' moves.

Is Retail Value Inc. (NYSE:RVI) a healthy stock for your portfolio? Money managers are in a bullish mood. The number of bullish hedge fund bets advanced by 4 recently. Our calculations also showed that RVI isn't among the 30 most popular stocks among hedge funds.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Christian Leone Luxor Capital

We're going to take a peek at the latest hedge fund action surrounding Retail Value Inc. (NYSE:RVI).

Hedge fund activity in Retail Value Inc. (NYSE:RVI)

At the end of the first quarter, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 31% from the fourth quarter of 2018. Below, you can check out the change in hedge fund sentiment towards RVI over the last 15 quarters. With the smart money's sentiment swirling, there exists a select group of notable hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).

RVI_june2019

Among these funds, Luxor Capital Group held the most valuable stake in Retail Value Inc. (NYSE:RVI), which was worth $93.3 million at the end of the first quarter. On the second spot was Indaba Capital Management which amassed $20.8 million worth of shares. Moreover, Blue Mountain Capital, Hawk Ridge Management, and Newtyn Management were also bullish on Retail Value Inc. (NYSE:RVI), allocating a large percentage of their portfolios to this stock.

With a general bullishness amongst the heavyweights, key money managers have jumped into Retail Value Inc. (NYSE:RVI) headfirst. Millennium Management, managed by Israel Englander, created the most outsized position in Retail Value Inc. (NYSE:RVI). Millennium Management had $3.1 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital also made a $1.3 million investment in the stock during the quarter. The other funds with new positions in the stock are Paul Marshall and Ian Wace's Marshall Wace LLP, Andre F. Perold's HighVista Strategies, and Ken Griffin's Citadel Investment Group.

Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Retail Value Inc. (NYSE:RVI) but similarly valued. These stocks are Aurinia Pharmaceuticals Inc (NASDAQ:AUPH), 500.com Limited (NYSE:WBAI), Gamco Investors Inc. (NYSE:GBL), and Odonate Therapeutics, Inc. (NASDAQ:ODT). This group of stocks' market caps are closest to RVI's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AUPH,13,88651,5 WBAI,2,426,1 GBL,9,11633,1 ODT,9,339827,-1 Average,8.25,110134,1.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 8.25 hedge funds with bullish positions and the average amount invested in these stocks was $110 million. That figure was $169 million in RVI's case. Aurinia Pharmaceuticals Inc (NASDAQ:AUPH) is the most popular stock in this table. On the other hand 500.com Limited (NYSE:WBAI) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks Retail Value Inc. (NYSE:RVI) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Hedge funds were also right about betting on RVI as the stock returned 4.2% during the same period and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

Disclosure: None. This article was originally published at Insider Monkey.

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