Hedge funds and other investment firms that we track manage billions of dollars of their wealthy clients' money, and needless to say, they are painstakingly thorough when analyzing where to invest this money, as their own wealth also depends on it. Regardless of the various methods used by elite investors like David Tepper and David Abrams, the resources they expend are second-to-none. This is especially valuable when it comes to small-cap stocks, which is where they generate their strongest outperformance, as their resources give them a huge edge when it comes to studying these stocks compared to the average investor, which is why we intently follow their activity in the small-cap space. Nevertheless, it is also possible to identify cheap large cap stocks by following the footsteps of best performing hedge funds.
LiveRamp Holdings, Inc. (NYSE:RAMP) was in 22 hedge funds' portfolios at the end of June. RAMP shareholders have witnessed a decrease in support from the world's most elite money managers lately. There were 23 hedge funds in our database with RAMP holdings at the end of the previous quarter. Our calculations also showed that RAMP isn't among the 30 most popular stocks among hedge funds (view the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We're going to take a look at the key hedge fund action regarding LiveRamp Holdings, Inc. (NYSE:RAMP).
What does smart money think about LiveRamp Holdings, Inc. (NYSE:RAMP)?
Heading into the third quarter of 2019, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of -4% from the first quarter of 2019. On the other hand, there were a total of 19 hedge funds with a bullish position in RAMP a year ago. So, let's examine 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, Gavin M. Abrams's Abrams Bison Investments has the most valuable position in LiveRamp Holdings, Inc. (NYSE:RAMP), worth close to $102.4 million, comprising 10.6% of its total 13F portfolio. Coming in second is Robert G. Moses of RGM Capital, with a $57.5 million position; the fund has 4.1% of its 13F portfolio invested in the stock. Other peers with similar optimism comprise Ken Griffin's Citadel Investment Group, Principal Global Investors's Columbus Circle Investors and Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital.
Since LiveRamp Holdings, Inc. (NYSE:RAMP) has witnessed declining sentiment from the entirety of the hedge funds we track, we can see that there was a specific group of funds that decided to sell off their full holdings last quarter. Intriguingly, Benjamin Pass's TOMS Capital cut the largest position of all the hedgies watched by Insider Monkey, valued at close to $9.6 million in call options, and Matthew Hulsizer's PEAK6 Capital Management was right behind this move, as the fund sold off about $2.8 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest dropped by 1 funds last quarter.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as LiveRamp Holdings, Inc. (NYSE:RAMP) but similarly valued. These stocks are MFA Financial, Inc. (NYSE:MFA), Legg Mason, Inc. (NYSE:LM), Vermilion Energy Inc (NYSE:VET), and Cabot Microelectronics Corporation (NASDAQ:CCMP). This group of stocks' market values match RAMP's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MFA,17,103174,1 LM,18,448975,1 VET,7,9671,1 CCMP,13,293721,-4 Average,13.75,213885,-0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.75 hedge funds with bullish positions and the average amount invested in these stocks was $214 million. That figure was $309 million in RAMP's case. Legg Mason, Inc. (NYSE:LM) is the most popular stock in this table. On the other hand Vermilion Energy Inc (NYSE:VET) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks LiveRamp Holdings, Inc. (NYSE:RAMP) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately RAMP wasn't nearly as popular as these 20 stocks and hedge funds that were betting on RAMP were disappointed as the stock returned -11.4% during the third quarter 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 many of these stocks already outperformed the market in Q3.
Disclosure: None. This article was originally published at Insider Monkey.