There are several ways to beat the market, and investing in small cap stocks has historically been one of them. We like to improve the odds of beating the market further by examining what famous hedge fund operators such as Jeff Ubben, George Soros and Carl Icahn think. Those hedge fund operators make billions of dollars each year by hiring the best and the brightest to do research on stocks, including small cap stocks that big brokerage houses simply don't cover. Because of Carl Icahn and other elite funds' exemplary historical records, we pay attention to their small cap picks. In this article, we use hedge fund filing data to analyze Realogy Holdings Corp (NYSE:RLGY).
Realogy Holdings Corp (NYSE:RLGY) investors should be aware of an increase in activity from the world's largest hedge funds lately. RLGY was in 28 hedge funds' portfolios at the end of the first quarter of 2019. There were 20 hedge funds in our database with RLGY positions at the end of the previous quarter. Our calculations also showed that rlgy isn't among the 30 most popular stocks among hedge funds.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. 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.
We're going to view the new hedge fund action regarding Realogy Holdings Corp (NYSE:RLGY).
What does the smart money think about Realogy Holdings Corp (NYSE:RLGY)?
At Q1's end, a total of 28 of the hedge funds tracked by Insider Monkey were long this stock, a change of 40% from the fourth quarter of 2018. Below, you can check out the change in hedge fund sentiment towards RLGY over the last 15 quarters. With the smart money's capital changing hands, there exists an "upper tier" of notable hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).
More specifically, Southeastern Asset Management was the largest shareholder of Realogy Holdings Corp (NYSE:RLGY), with a stake worth $117.6 million reported as of the end of March. Trailing Southeastern Asset Management was Okumus Fund Management, which amassed a stake valued at $93.4 million. Tremblant Capital, Pzena Investment Management, and Bridgewater Associates were also very fond of the stock, giving the stock large weights in their portfolios.
Now, key money managers have jumped into Realogy Holdings Corp (NYSE:RLGY) headfirst. Bridgewater Associates, managed by Ray Dalio, established the most valuable position in Realogy Holdings Corp (NYSE:RLGY). Bridgewater Associates had $20.4 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital also initiated a $19.3 million position during the quarter. The other funds with new positions in the stock are Brandon Haley's Holocene Advisors, David Keidan's Buckingham Capital Management, and David Harding's Winton Capital Management.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Realogy Holdings Corp (NYSE:RLGY) but similarly valued. These stocks are Avon Products, Inc. (NYSE:AVP), Natera Inc (NASDAQ:NTRA), First Majestic Silver Corp (NYSE:AG), and Varex Imaging Corporation (NASDAQ:VREX). All of these stocks' market caps resemble RLGY's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AVP,22,260384,-2 NTRA,18,154179,1 AG,8,8553,-2 VREX,20,110554,5 Average,17,133418,0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $133 million. That figure was $442 million in RLGY's case. Avon Products, Inc. (NYSE:AVP) is the most popular stock in this table. On the other hand First Majestic Silver Corp (NYSE:AG) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Realogy Holdings Corp (NYSE:RLGY) 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. Unfortunately RLGY wasn't nearly as popular as these 20 stocks and hedge funds that were betting on RLGY were disappointed as the stock returned -34.7% during the same period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market in Q2.
Disclosure: None. This article was originally published at Insider Monkey.