The market has been volatile in the fourth quarter as the Federal Reserve continued its rate hikes to normalize the interest rates. 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 7 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, and the funds' movements is one of the reasons why the major indexes have retraced. In this article, we analyze what the smart money thinks of RPT Realty (NYSE:RPT) and find out how it is affected by hedge funds' moves.
RPT Realty (NYSE:RPT) investors should be aware of an increase in activity from the world's largest hedge funds of late. Our calculations also showed that RPT isn't among the 30 most popular stocks among hedge funds.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.5% through March 12, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We're going to take a look at the key hedge fund action encompassing RPT Realty (NYSE:RPT).
How have hedgies been trading RPT Realty (NYSE:RPT)?
Heading into the first quarter of 2019, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 22% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in RPT over the last 14 quarters. With hedgies' sentiment swirling, there exists a select group of noteworthy hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).
The largest stake in RPT Realty (NYSE:RPT) was held by Citadel Investment Group, which reported holding $5.2 million worth of stock at the end of December. It was followed by Renaissance Technologies with a $2.7 million position. Other investors bullish on the company included Two Sigma Advisors, AQR Capital Management, and PEAK6 Capital Management.
Now, key money managers have jumped into RPT Realty (NYSE:RPT) headfirst. Citadel Investment Group, managed by Ken Griffin, established the most outsized position in RPT Realty (NYSE:RPT). Citadel Investment Group had $5.2 million invested in the company at the end of the quarter. Jim Simons's Renaissance Technologies also made a $2.7 million investment in the stock during the quarter. The other funds with brand new RPT positions are John Overdeck and David Siegel's Two Sigma Advisors, Cliff Asness's AQR Capital Management, and Matthew Hulsizer's PEAK6 Capital Management.
Let's check out hedge fund activity in other stocks similar to RPT Realty (NYSE:RPT). These stocks are The Chefs Warehouse, Inc (NASDAQ:CHEF), Endurance International Group Holdings Inc (NASDAQ:EIGI), New Mountain Finance Corp. (NYSE:NMFC), and Tronox Holdings plc (NYSE:TROX). This group of stocks' market valuations resemble RPT's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CHEF,10,49962,0 EIGI,18,113243,3 NMFC,11,15280,-1 TROX,26,144390,-4 Average,16.25,80719,-0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.25 hedge funds with bullish positions and the average amount invested in these stocks was $81 million. That figure was $12 million in RPT's case. Tronox Holdings plc (NYSE:TROX) is the most popular stock in this table. On the other hand The Chefs Warehouse, Inc (NASDAQ:CHEF) is the least popular one with only 10 bullish hedge fund positions. RPT Realty (NYSE:RPT) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately RPT wasn't nearly as popular as these 15 stock (hedge fund sentiment was quite bearish); RPT investors were disappointed as the stock returned -1.1% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.