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In this article you are going to find out whether hedge funds think RealPage, Inc. (NASDAQ:RP) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It's not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Is RP stock a buy or sell? RealPage, Inc. (NASDAQ:RP) shareholders have witnessed an increase in hedge fund sentiment recently. RealPage, Inc. (NASDAQ:RP) was in 48 hedge funds' portfolios at the end of December. The all time high for this statistic is 39. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 39 hedge funds in our database with RP holdings at the end of September. Our calculations also showed that RP isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings).
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 124 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Robert Moses of RGM Capital
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best hydrogen fuel cell 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 (or at the end of this article). Now let's take a look at the fresh hedge fund action surrounding RealPage, Inc. (NASDAQ:RP).
Do Hedge Funds Think RP Is A Good Stock To Buy Now?
At the end of the fourth quarter, a total of 48 of the hedge funds tracked by Insider Monkey were long this stock, a change of 23% from the previous quarter. By comparison, 36 hedge funds held shares or bullish call options in RP 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.
More specifically, Stockbridge Partners was the largest shareholder of RealPage, Inc. (NASDAQ:RP), with a stake worth $359.6 million reported as of the end of December. Trailing Stockbridge Partners was Eminence Capital, which amassed a stake valued at $248.1 million. Millennium Management, RGM Capital, and Echo Street Capital Management 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 Banbury Partners allocated the biggest weight to RealPage, Inc. (NASDAQ:RP), around 10.14% of its 13F portfolio. Stockbridge Partners is also relatively very bullish on the stock, setting aside 8.46 percent of its 13F equity portfolio to RP.
Consequently, key money managers have jumped into RealPage, Inc. (NASDAQ:RP) headfirst. TIG Advisors, managed by Carl Tiedemann and Michael Tiedemann, created the most valuable position in RealPage, Inc. (NASDAQ:RP). TIG Advisors had $83.2 million invested in the company at the end of the quarter. John Orrico's Water Island Capital also initiated a $75.5 million position during the quarter. The other funds with brand new RP positions are Robert Emil Zoellner's Alpine Associates, Steven Clark's Omni Partners, and Matthew Halbower's Pentwater Capital Management.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as RealPage, Inc. (NASDAQ:RP) but similarly valued. We will take a look at AptarGroup, Inc. (NYSE:ATR), A. O. Smith Corporation (NYSE:AOS), Melco Resorts & Entertainment Limited (NASDAQ:MLCO), Pentair plc (NYSE:PNR), Aspen Technology, Inc. (NASDAQ:AZPN), CyrusOne Inc (NASDAQ:CONE), and Formula One Group (NASDAQ:FWONA). This group of 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 ATR,20,271051,-8 AOS,31,291962,1 MLCO,30,766350,-4 PNR,29,664762,-5 AZPN,29,1175533,3 CONE,21,280933,-9 FWONA,21,259250,2 Average,25.9,529977,-2.9 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 25.9 hedge funds with bullish positions and the average amount invested in these stocks was $530 million. That figure was $1898 million in RP's case. A. O. Smith Corporation (NYSE:AOS) is the most popular stock in this table. On the other hand AptarGroup, Inc. (NYSE:ATR) is the least popular one with only 20 bullish hedge fund positions. Compared to these stocks RealPage, Inc. (NASDAQ:RP) is more popular among hedge funds. Our overall hedge fund sentiment score for RP is 90. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 5.3% in 2021 through March 19th and still beat the market by 0.8 percentage points. Unfortunately RP wasn't nearly as popular as these 30 stocks and hedge funds that were betting on RP were disappointed as the stock returned 0.2% since the end of the fourth quarter (through 3/19) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.