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Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 900 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds' 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about Rattler Midstream LP (NASDAQ:RTLR) in this article.
Is RTLR a good stock to buy now? Prominent investors were turning less bullish. The number of bullish hedge fund bets fell by 1 recently. Rattler Midstream LP (NASDAQ:RTLR) was in 6 hedge funds' portfolios at the end of March. The all time high for this statistic is 20. Our calculations also showed that RTLR isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 7 hedge funds in our database with RTLR holdings at the end of December.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Ken Griffin of Citadel Investment Group
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund owns nearly 40% of this $24 biotech stock and is trying to buy the rest for around $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With all of this in mind we're going to take a gander at the key hedge fund action surrounding Rattler Midstream LP (NASDAQ:RTLR).
Do Hedge Funds Think RTLR Is A Good Stock To Buy Now?
At first quarter's end, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -14% from the fourth quarter of 2020. By comparison, 9 hedge funds held shares or bullish call options in RTLR a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Rattler Midstream LP (NASDAQ:RTLR) was held by Cardinal Capital, which reported holding $36.7 million worth of stock at the end of December. It was followed by Prescott Group Capital Management with a $11.1 million position. Other investors bullish on the company included Citadel Investment Group, Renaissance Technologies, and Millennium Management. In terms of the portfolio weights assigned to each position Prescott Group Capital Management allocated the biggest weight to Rattler Midstream LP (NASDAQ:RTLR), around 3.24% of its 13F portfolio. Cardinal Capital is also relatively very bullish on the stock, dishing out 0.9 percent of its 13F equity portfolio to RTLR.
Since Rattler Midstream LP (NASDAQ:RTLR) has witnessed declining sentiment from the smart money, it's easy to see that there exists a select few funds who sold off their positions entirely in the first quarter. It's worth mentioning that Stuart J. Zimmer's Zimmer Partners sold off the largest position of the "upper crust" of funds followed by Insider Monkey, worth an estimated $22.2 million in stock, and Randall Smith's Alden Global Capital was right behind this move, as the fund cut about $2.4 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest fell by 1 funds in the first quarter.
Let's now review hedge fund activity in other stocks similar to Rattler Midstream LP (NASDAQ:RTLR). We will take a look at The E.W. Scripps Company (NYSE:SSP), Tattooed Chef, Inc. (NASDAQ:TTCF), Vuzix Corporation (NASDAQ:VUZI), Immunovant, Inc. (NASDAQ:IMVT), Enerpac Tool Group Corp. (NYSE:EPAC), Heartland Express, Inc. (NASDAQ:HTLD), and Delek Logistics Partners LP (NYSE:DKL). This group of stocks' market valuations match RTLR's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SSP,22,126334,10 TTCF,10,58744,-1 VUZI,14,74041,4 IMVT,26,131007,-10 EPAC,7,114807,-4 HTLD,12,50604,-1 DKL,1,2627,0 Average,13.1,79738,-0.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.1 hedge funds with bullish positions and the average amount invested in these stocks was $80 million. That figure was $54 million in RTLR's case. Immunovant, Inc. (NASDAQ:IMVT) is the most popular stock in this table. On the other hand Delek Logistics Partners LP (NYSE:DKL) is the least popular one with only 1 bullish hedge fund positions. Rattler Midstream LP (NASDAQ:RTLR) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for RTLR is 23. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 19.3% in 2021 through June 25th and surpassed the market again by 4.8 percentage points. Unfortunately RTLR wasn't nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); RTLR investors were disappointed as the stock returned 4.5% since the end of March (through 6/25) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.
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Disclosure: None. This article was originally published at Insider Monkey.