In this article we will take a look at whether hedge funds think RADCOM Ltd. (NASDAQ:RDCM) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
RADCOM Ltd. (NASDAQ:RDCM) has seen a decrease in activity from the world's largest hedge funds lately. Our calculations also showed that RDCM 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.
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 monthly stock picks returned 87% since March 2017 and outperformed the S&P 500 ETFs by more than 51 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
[caption id="attachment_27209" align="aligncenter" width="400"] Jim Simons of Renaissance Technologies[/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. With all of this in mind we're going to take a look at the new hedge fund action encompassing RADCOM Ltd. (NASDAQ:RDCM).
How have hedgies been trading RADCOM Ltd. (NASDAQ:RDCM)?
At Q1's end, a total of 4 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -20% from the previous quarter. On the other hand, there were a total of 4 hedge funds with a bullish position in RDCM a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, G2 Investment Partners Management, managed by Josh Goldberg, holds the number one position in RADCOM Ltd. (NASDAQ:RDCM). G2 Investment Partners Management has a $3.8 million position in the stock, comprising 1.3% of its 13F portfolio. The second most bullish fund manager is William C. Martin of Raging Capital Management, with a $3.2 million position; 2.4% of its 13F portfolio is allocated to the stock. Other peers that are bullish comprise Richard Mashaal's Rima Senvest Management, Renaissance Technologies and . In terms of the portfolio weights assigned to each position Raging Capital Management allocated the biggest weight to RADCOM Ltd. (NASDAQ:RDCM), around 2.41% of its 13F portfolio. G2 Investment Partners Management is also relatively very bullish on the stock, setting aside 1.25 percent of its 13F equity portfolio to RDCM.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Springbok Capital. One hedge fund selling its entire position doesn't always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don't think this is the case in this case because none of the 750+ hedge funds tracked by Insider Monkey identified RDCM as a viable investment and initiated a position in the stock.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as RADCOM Ltd. (NASDAQ:RDCM) but similarly valued. These stocks are Applied Genetic Technologies Corp (NASDAQ:AGTC), AgroFresh Solutions Inc (NASDAQ:AGFS), Cedar Realty Trust Inc (NYSE:CDR), and ESSA Pharma Inc. (NASDAQ:EPIX). This group of stocks' market values are closest to RDCM's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AGTC,12,22216,5 AGFS,4,926,-2 CDR,9,4554,1 EPIX,4,27728,-1 Average,7.25,13856,0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 7.25 hedge funds with bullish positions and the average amount invested in these stocks was $14 million. That figure was $9 million in RDCM's case. Applied Genetic Technologies Corp (NASDAQ:AGTC) is the most popular stock in this table. On the other hand AgroFresh Solutions Inc (NASDAQ:AGFS) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks RADCOM Ltd. (NASDAQ:RDCM) is even less popular than AGFS. Hedge funds dodged a bullet by taking a bearish stance towards RDCM. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May but managed to beat the market by 13.2 percentage points. Unfortunately RDCM wasn't nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); RDCM investors were disappointed as the stock returned 12.3% during the second quarter (through the end of May) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in 2020.
Disclosure: None. This article was originally published at Insider Monkey.