Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the second quarter. You can find articles about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of Realogy Holdings Corp (NYSE:RLGY) based on that data and determine whether they were really smart about the stock.
Realogy Holdings Corp (NYSE:RLGY) investors should be aware of a decrease in support from the world's most elite money managers recently. Realogy Holdings Corp (NYSE:RLGY) was in 24 hedge funds' portfolios at the end of June. The all time high for this statistics is 49. There were 25 hedge funds in our database with RLGY positions at the end of the first quarter. Our calculations also showed that RLGY isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). Video: Watch our video about the top 5 most popular hedge fund stocks.
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 58 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, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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 website to get excerpts of these letters in your inbox. Now let's take a look at the key hedge fund action surrounding Realogy Holdings Corp (NYSE:RLGY).
How have hedgies been trading Realogy Holdings Corp (NYSE:RLGY)?
Heading into the third quarter of 2020, a total of 24 of the hedge funds tracked by Insider Monkey were long this stock, a change of -4% from the first quarter of 2020. By comparison, 24 hedge funds held shares or bullish call options in RLGY 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.
Among these funds, Southeastern Asset Management held the most valuable stake in Realogy Holdings Corp (NYSE:RLGY), which was worth $86.6 million at the end of the third quarter. On the second spot was Tremblant Capital which amassed $48 million worth of shares. Prentice Capital Management, Pzena Investment Management, and Arrowstreet Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Prentice Capital Management allocated the biggest weight to Realogy Holdings Corp (NYSE:RLGY), around 12.36% of its 13F portfolio. Southeastern Asset Management is also relatively very bullish on the stock, designating 2.16 percent of its 13F equity portfolio to RLGY.
Due to the fact that Realogy Holdings Corp (NYSE:RLGY) has faced a decline in interest from the aggregate hedge fund industry, it's safe to say that there exists a select few funds that elected to cut their positions entirely last quarter. At the top of the heap, Ken Griffin's Citadel Investment Group cut the largest position of all the hedgies followed by Insider Monkey, valued at about $0.5 million in stock, and Andy Redleaf's Whitebox Advisors was right behind this move, as the fund said goodbye to about $0.3 million worth. These moves are interesting, as total hedge fund interest fell by 1 funds last quarter.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Realogy Holdings Corp (NYSE:RLGY) but similarly valued. We will take a look at OrthoPediatrics Corp. (NASDAQ:KIDS), Trinseo S.A. (NYSE:TSE), QAD Inc. (NASDAQ:QADB), Myriad Genetics, Inc. (NASDAQ:MYGN), Calix Inc (NYSE:CALX), QAD Inc. (NASDAQ:QADA), and BioCryst Pharmaceuticals, Inc. (NASDAQ:BCRX). This group of stocks' market valuations match RLGY's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position KIDS,13,55470,6 TSE,18,39880,1 QADB,1,635,0 MYGN,21,132474,10 CALX,17,168914,2 QADA,18,127272,2 BCRX,26,250229,1 Average,16.3,110696,3.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.3 hedge funds with bullish positions and the average amount invested in these stocks was $111 million. That figure was $259 million in RLGY's case. BioCryst Pharmaceuticals, Inc. (NASDAQ:BCRX) is the most popular stock in this table. On the other hand QAD Inc. (NASDAQ:QADB) is the least popular one with only 1 bullish hedge fund positions. Realogy Holdings Corp (NYSE:RLGY) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for RLGY is 64.7. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 21.3% in 2020 through September 25th and still beat the market by 17.7 percentage points. Hedge funds were also right about betting on RLGY as the stock returned 22.5% during Q3 (through September 25th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.