We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn't mean that they don't have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards RTI Surgical Holdings, Inc. (NASDAQ:RTIX) and determine whether hedge funds skillfully traded this stock.
RTI Surgical Holdings, Inc. (NASDAQ:RTIX) shareholders have witnessed a decrease in support from the world's most elite money managers lately. RTIX was in 10 hedge funds' portfolios at the end of the first quarter of 2020. There were 13 hedge funds in our database with RTIX holdings at the end of the previous quarter. Our calculations also showed that RTIX 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.
Today there are many gauges shareholders have at their disposal to analyze stocks. Two of the most useful gauges are hedge fund and insider trading indicators. Our experts have shown that, historically, those who follow the best picks of the elite fund managers can outperform the market by a healthy amount (see the details here).
At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a "weekend trading strategy", so we look into his strategy's picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller's investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now let's take a glance at the new hedge fund action encompassing RTI Surgical Holdings, Inc. (NASDAQ:RTIX).
How are hedge funds trading RTI Surgical Holdings, Inc. (NASDAQ:RTIX)?
Heading into the second quarter of 2020, a total of 10 of the hedge funds tracked by Insider Monkey were long this stock, a change of -23% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards RTIX over the last 18 quarters. With the smart money's positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Healthcor Management LP, managed by Arthur B Cohen and Joseph Healey, holds the biggest position in RTI Surgical Holdings, Inc. (NASDAQ:RTIX). Healthcor Management LP has a $3.7 million position in the stock, comprising 0.2% of its 13F portfolio. The second largest stake is held by Omega Advisors, managed by Leon Cooperman, which holds a $2.7 million position; the fund has 0.4% of its 13F portfolio invested in the stock. Other peers with similar optimism include Chuck Royce's Royce & Associates, Renaissance Technologies and D. E. Shaw's D E Shaw. In terms of the portfolio weights assigned to each position Omega Advisors allocated the biggest weight to RTI Surgical Holdings, Inc. (NASDAQ:RTIX), around 0.35% of its 13F portfolio. Healthcor Management LP is also relatively very bullish on the stock, designating 0.16 percent of its 13F equity portfolio to RTIX.
Seeing as RTI Surgical Holdings, Inc. (NASDAQ:RTIX) has witnessed bearish sentiment from hedge fund managers, it's easy to see that there is a sect of hedge funds who were dropping their full holdings heading into Q4. At the top of the heap, Kris Jenner, Gordon Bussard, Graham McPhail's Rock Springs Capital Management dropped the biggest stake of the "upper crust" of funds watched by Insider Monkey, worth close to $5.3 million in stock. Peter Algert and Kevin Coldiron's fund, Algert Coldiron Investors, also cut its stock, about $0.1 million worth. These transactions are important to note, as total hedge fund interest was cut by 3 funds heading into Q4.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as RTI Surgical Holdings, Inc. (NASDAQ:RTIX) but similarly valued. We will take a look at Oxford Square Capital Corp. (NASDAQ:OXSQ), EyePoint Pharmaceuticals, Inc. (NASDAQ:EYPT), Pieris Pharmaceuticals, Inc. (NASDAQ:PIRS), and Lakeland Industries, Inc. (NASDAQ:LAKE). This group of stocks' market values match RTIX's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position OXSQ,6,2487,-1 EYPT,3,812,1 PIRS,19,47612,-2 LAKE,9,18007,5 Average,9.25,17230,0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 9.25 hedge funds with bullish positions and the average amount invested in these stocks was $17 million. That figure was $11 million in RTIX's case. Pieris Pharmaceuticals, Inc. (NASDAQ:PIRS) is the most popular stock in this table. On the other hand EyePoint Pharmaceuticals, Inc. (NASDAQ:EYPT) is the least popular one with only 3 bullish hedge fund positions. RTI Surgical Holdings, Inc. (NASDAQ:RTIX) 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 12.3% in 2020 through June 30th but still beat the market by 15.5 percentage points. Hedge funds were also right about betting on RTIX as the stock returned 86% in Q2 and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.