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 first 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 4.5 years and analyze what the smart money thinks of RealPage, Inc. (NASDAQ:RP) based on that data.
Is RealPage, Inc. (NASDAQ:RP) a first-rate stock to buy now? The smart money is in a bearish mood. The number of long hedge fund positions dropped by 7 lately. Our calculations also showed that RP isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). RP was in 29 hedge funds' portfolios at the end of the first quarter of 2020. There were 36 hedge funds in our database with RP positions at the end of the previous quarter. 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.
[caption id="attachment_690802" align="aligncenter" width="394"] Kevin Oram of Praesidium Investment Management Company[/caption]
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like these. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we're going to go over the key hedge fund action encompassing RealPage, Inc. (NASDAQ:RP).
What have hedge funds been doing with RealPage, Inc. (NASDAQ:RP)?
At Q1's end, a total of 29 of the hedge funds tracked by Insider Monkey were long this stock, a change of -19% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards RP over the last 18 quarters. With the smart money's sentiment swirling, there exists a few notable hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).
The largest stake in RealPage, Inc. (NASDAQ:RP) was held by Stockbridge Partners, which reported holding $189.2 million worth of stock at the end of September. It was followed by Eminence Capital with a $183.1 million position. Other investors bullish on the company included Echo Street Capital Management, Praesidium Investment Management Company, and Harbor Spring Capital. In terms of the portfolio weights assigned to each position Banbury Partners allocated the biggest weight to RealPage, Inc. (NASDAQ:RP), around 7.71% of its 13F portfolio. Stockbridge Partners is also relatively very bullish on the stock, setting aside 7.5 percent of its 13F equity portfolio to RP.
Seeing as RealPage, Inc. (NASDAQ:RP) has witnessed declining sentiment from hedge fund managers, it's safe to say that there exists a select few funds that slashed their positions entirely by the end of the first quarter. Interestingly, Joshua Friedman and Mitchell Julis's Canyon Capital Advisors said goodbye to the biggest stake of the "upper crust" of funds watched by Insider Monkey, worth close to $48.8 million in stock, and Noam Gottesman's GLG Partners was right behind this move, as the fund said goodbye to about $18.5 million worth. These moves are interesting, as aggregate hedge fund interest was cut by 7 funds by the end of the first quarter.
Let's now take a look at hedge fund activity in other stocks similar to RealPage, Inc. (NASDAQ:RP). We will take a look at Kinross Gold Corporation (NYSE:KGC), Pentair plc (NYSE:PNR), Morningstar, Inc. (NASDAQ:MORN), and Kemper Corporation (NYSE:KMPR). All of these stocks' market caps match RP's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position KGC,28,447018,3 PNR,29,391097,3 MORN,13,235862,-8 KMPR,13,48502,-7 Average,20.75,280620,-2.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.75 hedge funds with bullish positions and the average amount invested in these stocks was $281 million. That figure was $604 million in RP's case. Pentair plc (NYSE:PNR) is the most popular stock in this table. On the other hand Morningstar, Inc. (NASDAQ:MORN) is the least popular one with only 13 bullish hedge fund positions. RealPage, Inc. (NASDAQ:RP) is not the most popular stock in this group but hedge fund interest is still above average. 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 8.3% in 2020 through the end of May but still beat the market by 13.2 percentage points. Hedge funds were also right about betting on RP as the stock returned 28.1% in Q2 (through the end of May) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.