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In this article we will check out the progression of hedge fund sentiment towards Realogy Holdings Corp (NYSE:RLGY) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Is Realogy Holdings Corp (NYSE:RLGY) the right investment to pursue these days? Prominent investors were getting less bullish. The number of long hedge fund positions fell by 4 in recent months. Realogy Holdings Corp (NYSE:RLGY) was in 22 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic is 49. Our calculations also showed that RLGY isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).
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 S&P 500 ETFs by 115 percentage points since March 2017 (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.
Mason Hawkins of Southeastern Asset Management
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, Chuck Schumer recently stated that marijuana legalization will be a Senate priority. So, we are checking out this under the radar stock that will benefit from this. 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 let's take a peek at the recent hedge fund action regarding Realogy Holdings Corp (NYSE:RLGY).
Do Hedge Funds Think RLGY Is A Good Stock To Buy Now?
Heading into the second quarter of 2021, a total of 22 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -15% from the previous quarter. On the other hand, there were a total of 25 hedge funds with a bullish position in RLGY 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.
The largest stake in Realogy Holdings Corp (NYSE:RLGY) was held by Southeastern Asset Management, which reported holding $132.5 million worth of stock at the end of December. It was followed by Tremblant Capital with a $37.7 million position. Other investors bullish on the company included Prentice Capital Management, Two Sigma Advisors, and Royce & Associates. In terms of the portfolio weights assigned to each position Prentice Capital Management allocated the biggest weight to Realogy Holdings Corp (NYSE:RLGY), around 4.42% of its 13F portfolio. Southeastern Asset Management is also relatively very bullish on the stock, dishing out 2.83 percent of its 13F equity portfolio to RLGY.
Judging by the fact that Realogy Holdings Corp (NYSE:RLGY) has faced declining sentiment from the entirety of the hedge funds we track, it's easy to see that there was a specific group of hedgies who sold off their full holdings heading into Q2. At the top of the heap, Richard S. Pzena's Pzena Investment Management cut the largest investment of the "upper crust" of funds monitored by Insider Monkey, valued at close to $41.4 million in stock, and Matthew Hulsizer's PEAK6 Capital Management was right behind this move, as the fund dumped about $2.4 million worth. These moves are interesting, as aggregate hedge fund interest was cut by 4 funds heading into Q2.
Let's now take a look at hedge fund activity in other stocks similar to Realogy Holdings Corp (NYSE:RLGY). We will take a look at GoPro Inc (NASDAQ:GPRO), Zuora, Inc. (NYSE:ZUO), GenMark Diagnostics, Inc (NASDAQ:GNMK), Cornerstone Building Brands, Inc. (NYSE:CNR), EnPro Industries, Inc. (NYSE:NPO), Heska Corp (NASDAQ:HSKA), and Five Prime Therapeutics Inc (NASDAQ:FPRX). This group of stocks' market caps match RLGY's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GPRO,36,395112,8 ZUO,21,151435,-1 GNMK,30,529479,9 CNR,27,169852,5 NPO,17,213801,3 HSKA,28,283963,11 FPRX,29,719407,4 Average,26.9,351864,5.6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 26.9 hedge funds with bullish positions and the average amount invested in these stocks was $352 million. That figure was $257 million in RLGY's case. GoPro Inc (NASDAQ:GPRO) is the most popular stock in this table. On the other hand EnPro Industries, Inc. (NYSE:NPO) is the least popular one with only 17 bullish hedge fund positions. Realogy Holdings Corp (NYSE:RLGY) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for RLGY is 27.6. 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. 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 23.8% in 2021 through July 16th and beat the market by 7.7 percentage points. A small number of hedge funds were also right about betting on RLGY, though not to the same extent, as the stock returned 12.8% since the end of Q1 (through July 16th) and outperformed the market.
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Disclosure: None. This article was originally published at Insider Monkey.