Legendary investors such as Jeffrey Talpins and Seth Klarman earn enormous amounts of money for themselves and their investors by doing in-depth research on small-cap stocks that big brokerage houses don't publish. Small cap stocks -especially when they are screened well- can generate substantial outperformance versus a boring index fund. That's why we analyze the activity of those elite funds in these small-cap stocks. In the following paragraphs, we analyze RealPage, Inc. (NASDAQ:RP) from the perspective of those elite funds.
Is RealPage, Inc. (NASDAQ:RP) the right pick for your portfolio? Hedge funds are betting on the stock. The number of bullish hedge fund positions rose by 5 lately. Our calculations also showed that rp isn't among the 30 most popular stocks among hedge funds. RP was in 26 hedge funds' portfolios at the end of March. There were 21 hedge funds in our database with RP positions at the end of the previous quarter.
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.
Let's take a peek at the key hedge fund action surrounding RealPage, Inc. (NASDAQ:RP).
What have hedge funds been doing with RealPage, Inc. (NASDAQ:RP)?
At Q1's end, a total of 26 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 24% from the previous quarter. On the other hand, there were a total of 16 hedge funds with a bullish position in RP a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey's hedge fund database, Sharlyn C. Heslam's Stockbridge Partners has the number one position in RealPage, Inc. (NASDAQ:RP), worth close to $224.8 million, corresponding to 8.3% of its total 13F portfolio. The second most bullish fund manager is Greg Poole of Echo Street Capital Management, with a $51.9 million position; the fund has 1% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors that are bullish contain Israel Englander's Millennium Management, Panayotis Takis Sparaggis's Alkeon Capital Management and Jay Genzer's Thames Capital Management.
With a general bullishness amongst the heavyweights, some big names were leading the bulls' herd. Lucha Capital Management, managed by Marcelo Desio, initiated the largest position in RealPage, Inc. (NASDAQ:RP). Lucha Capital Management had $15.1 million invested in the company at the end of the quarter. Mark N. Diker's Diker Management also initiated a $4.6 million position during the quarter. The other funds with new positions in the stock are Noam Gottesman's GLG Partners, Stanley Druckenmiller's Duquesne Capital, and John Overdeck and David Siegel's Two Sigma Advisors.
Let's check out hedge fund activity in other stocks similar to RealPage, Inc. (NASDAQ:RP). These stocks are Jefferies Financial Group Inc. (NYSE:JEF), CCompanhia Siderúrgica Nacional (NYSE:SID), Wix.Com Ltd (NASDAQ:WIX), and Allison Transmission Holdings Inc (NYSE:ALSN). This group of stocks' market values match RP's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position JEF,35,669334,-1 SID,8,69878,1 WIX,27,960848,0 ALSN,28,1169773,2 Average,24.5,717458,0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.5 hedge funds with bullish positions and the average amount invested in these stocks was $717 million. That figure was $436 million in RP's case. Jefferies Financial Group Inc. (NYSE:JEF) is the most popular stock in this table. On the other hand Companhia Siderúrgica Nacional (NYSE:SID) is the least popular one with only 8 bullish hedge fund positions. RealPage, Inc. (NASDAQ:RP) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. 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 RP wasn't nearly as popular as these 20 stocks and hedge funds that were betting on RP were disappointed as the stock returned -3.9% 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 so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.